[Senate Hearing 115-121]
[From the U.S. Government Publishing Office]
S. Hrg. 115-121
NOMINATIONS OF BRIAN D. MONTGOMERY,
ROBERT HUNTER KURTZ, AND SUZANNE
ISRAEL TUFTS
=======================================================================
HEARING
before the
COMMITTEE ON
BANKING,HOUSING,AND URBAN AFFAIRS
UNITED STATES SENATE
ONE HUNDRED FIFTEENTH CONGRESS
FIRST SESSION
ON
NOMINATIONS OF:
Brian D. Montgomery, of Texas, to be Assistant Secretary for Housing,
Federal Housing Commissioner, Department of Housing and Urban
Development
__________
Robert Hunter Kurtz, of Virginia, to be Assistant Secretary For Public
And Indian Housing, Department of Housing and Urban Development
__________
Suzanne Israel Tufts, of New York, to be Assistant Secretary For
Administration, Department of Housing and Urban Development
__________
OCTOBER 26, 2017
__________
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COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS
MIKE CRAPO, Idaho, Chairman
RICHARD C. SHELBY, Alabama SHERROD BROWN, Ohio
BOB CORKER, Tennessee JACK REED, Rhode Island
PATRICK J. TOOMEY, Pennsylvania ROBERT MENENDEZ, New Jersey
DEAN HELLER, Nevada JON TESTER, Montana
TIM SCOTT, South Carolina MARK R. WARNER, Virginia
BEN SASSE, Nebraska ELIZABETH WARREN, Massachusetts
TOM COTTON, Arkansas HEIDI HEITKAMP, North Dakota
MIKE ROUNDS, South Dakota JOE DONNELLY, Indiana
DAVID PERDUE, Georgia BRIAN SCHATZ, Hawaii
THOM TILLIS, North Carolina CHRIS VAN HOLLEN, Maryland
JOHN KENNEDY, Louisiana CATHERINE CORTEZ MASTO, Nevada
Gregg Richard, Staff Director
Mark Powden, Democratic Staff Director
Elad Roisman, Chief Counsel
Matt Jones, Professional Staff Member
Elisha Tuku, Democratic Chief Counsel
Laura Swanson, Democratic Deputy Staff Director
Beth Cooper, Democratic Professional Staff Member
Erin Barry, Democratic Professional Staff Member
Megan Cheney, Democratic Legislative Assistant
Dawn Ratliff, Chief Clerk
Jimmy Guiliano, Hearing Clerk
Shelvin Simmons, IT Director
Jim Crowell, Editor
(ii)
C O N T E N T S
----------
THURSDAY, OCTOBER 26, 2017
Page
Opening statement of Chairman Crapo.............................. 1
Opening statements, comments, or prepared statements of:
Senator Brown................................................ 2
NOMINEES
Brian D. Montgomery, of Texas, to be Assistant Secretary for
Housing, Federal Housing Commissioner, Department of Housing
and Urban
Development.................................................... 5
Prepared statement........................................... 29
Biographical sketch of nominee............................... 31
Responses to written questions of:
Senator Brown............................................ 65
Senator Shelby........................................... 69
Senator Scott............................................ 69
Senator Perdue........................................... 70
Senator Kennedy.......................................... 71
Senator Menendez......................................... 73
Senator Donnelly......................................... 78
Senator Schatz........................................... 79
Senator Cortez Masto..................................... 80
Robert Hunter Kurtz, of Virginia, to be Assistant Secretary for
Public and Indian Housing, Department of Housing and Urban
Development.................................................... 7
Prepared statement........................................... 46
Biographical sketch of nominee............................... 47
Responses to written questions of:
Senator Brown............................................ 82
Senator Scott............................................ 84
Senator Menendez......................................... 85
Senator Heitkamp......................................... 88
Senator Donnelly......................................... 90
Senator Cortez Masto..................................... 90
Suzanne Israel Tufts, of New York, to be Assistant Secretary for
Administration, Department of Housing and Urban Development.... 8
Prepared statement........................................... 55
Biographical sketch of nominee............................... 56
Responses to written questions of:
Senator Brown............................................ 93
Additional Material Supplied for the Record
Letters submitted in support of the nomination of Brian D.
Montgomery..................................................... 96
Letters submitted in support of the nomination of Robert Hunter
Kurtz.......................................................... 112
(iii)
NOMINATIONS OF BRIAN D. MONTGOMERY, OF TEXAS, TO BE ASSISTANT SECRETARY
FOR HOUSING, FEDERAL HOUSING COMMISSIONER, DEPARTMENT OF HOUSING AND
URBAN DEVELOPMENT; ROBERT HUNTER KURTZ, OF VIRGINIA, TO BE ASSISTANT
SECRETARY FOR PUBLIC AND INDIAN HOUSING, DEPARTMENT OF HOUSING AND
URBAN DEVELOPMENT; AND SUZANNE ISRAEL TUFTS, OF NEW YORK, TO BE
ASSISTANT SECRETARY FOR ADMINISTRATION, DEPARTMENT OF HOUSING AND URBAN
DEVELOPMENT
----------
THURSDAY, OCTOBER 26, 2017
U.S. Senate,
Committee on Banking, Housing, and Urban Affairs
Washington, DC.
The Committee met at 10 a.m., in room SD-538, Dirksen
Senate Office Building, Hon. Michael Crapo, Chairman of the
Committee, presiding.
OPENING STATEMENT OF CHAIRMAN MIKE CRAPO
Chairman Crapo. Good morning. This hearing will come to
order.
This morning, we will consider the nominations of three
more individuals to serve in key roles in the Department of
Housing and Urban Development.
Welcome to all of you, and congratulations on your
nominations to these important positions. I see friends and
family behind you, and I welcome them here today as well.
The nominees before us are Brian Montgomery to be the
Assistant Secretary for Housing and Federal Housing
Commissioner, Hunter Kurtz to be Assistant Secretary for Public
and Indian Housing, and Suzanne Tufts to be Assistant Secretary
for Administration.
If confirmed, each of these nominees will play a major role
in promoting access to safe and affordable housing for families
in America. Each also brings a wealth of experience and
expertise that will guide them well throughout their service at
HUD.
The Federal Housing Administration, or FHA, plays a major
role in our housing finance system by setting credit guidelines
and providing insurance for millions of home mortgages across
the country, yet it has been over 3 years since FHA has had
Senate-confirmed leadership.
Brian Montgomery is an ideal candidate to take up that
mantle, given that he has done it before. He has provided
steadfast leadership at the helm of FHA between 2005 and 2009,
during one of the most trying times that housing markets have
ever seen.
Mr. Montgomery is also no stranger to this Committee,
having testified before us on six other occasions on matters
relating to housing and housing finance, and we welcome him
back once again.
Hunter Kurtz has dedicated nearly his entire career to
housing policy, including over a decade of time at HUD, and has
had a hand in implementing housing programs at both the local
and Federal level. Most recently, he has served as a key voice
within HUD, as Deputy Chief of Staff for Policy and Programs.
Mr. Kurtz will bring this programmatic expertise to the Office
of Public and Indian Housing, where he will oversee some of
HUD's largest programs, including Public Housing and Housing
Choice Vouchers.
Suzanne Tufts, over her distinguished career as an
attorney, consultant, and CEO, has developed an expertise in
turnaround management and leadership development for both
Government and nonprofit organizations. As Assistant Secretary
for Administration at HUD, she would oversee HUD's enterprise-
level training, staffing, recruitment, and performance
management, and would advise Secretary Carson on human resource
matters. Ms. Tufts' reputation as an outside-the-box and
entrepreneurial thinker will make her a great addition to HUD's
leadership team.
I urge my colleagues to confirm all three of you without
delay as well as to confirm other HUD nominees that are still
pending before the Senate.
Once again, congratulations to all of you on your
nominations to these important offices, and thank you for your
willingness to serve.
Senator Brown.
STATEMENT OF SENATOR SHERROD BROWN
Senator Brown. Thank you, Mr. Chairman.
I want to join Chairman Crapo in welcoming our nominees and
their families and look forward to hearing their introductions
too, and thanks for your willingness to serve in these key
public service roles.
The Committee has gathered today to consider the
nominations of three individuals to serve at the Department of
Housing and Urban Development. HUD plays an important role in
addressing housing needs of families in Ohio and all around the
country.
The Chairman pointed out, not for the first time in this
Committee, that these positions have been unfilled for far too
long. I think it is important--and I absolutely do not blame
this Chairman for this--it has happened over and over, and I
think it is important to remind people that in the last
Congress, this Committee just refused to move on almost any
nominee. That is one reason we have so many openings at the
Federal Reserve. It is why some of these jobs have remained
unfilled. And I think it is important that we acknowledge that
and know that, and that the Trump administration understands
that the party that is not his is cooperating now with nominees
when 2 years ago, when the shoes were on the other feet, when
it was reversed, this Committee did not cooperate with a
Democratic President.
We consider these nominees at a time when the Nation faces
a number of housing challenges. The gap between housing cost
and wages has grown wider over the past decade. Over half-a-
million Americans face homelessness on any given night. A
quarter of all renters pay more than half of their incomes
toward rent. That makes your jobs and the job of HUD even more
essential to this Nation's national interest. At the same time,
we are losing existing affordable housing due to physical
deterioration, expiring affordability contracts, and increasing
rents for previously in expensive homes.
Access to mortgages for creditworthy borrowers remains
tight, making it hard for families to purchase a home and build
well. The FHA provides mortgage insurance to help creditworthy
borrowers access affordable and stable mortgage credit plays an
important countercyclical role in ensuring credit remains
available in all markets and all market conditions. To assist
in that role, FHA has taken steps to expand its quality
assurance program and to upgrade its technology.
If confirmed, Mr. Montgomery--and welcome--would oversee
over 1.2 million units of privately owned HUD-assisted
affordable housing for low-income families. As FHA
Commissioner, he would be entrusted to guide the FHA into the
future, ensuring both broad access to mortgage credit and
adequate oversight of participating lenders to avoid the
mistakes of the past. I look forward to hearing more from Mr.
Montgomery about how he will continue those efforts while
protecting taxpayers from lenders who do not play by the rules.
If confirmed as Assistant Secretary for Public and Indian
Housing, Mr. Kurtz will oversee the public housing and Section
8 Housing Choice Voucher programs, which help 3.3 million
households in urban, suburban, and rural communities find
affordable housing. Mr. Kurtz would administer programs to
address the deep housing needs of Native American, Alaska
Native, and Native Hawaiian communities. And there are a number
of Members on this Committee that care so much about Indian
housing and Native American housing and Native Hawaiian
community housing.
If confirmed as the Assistant Secretary for Administration,
Ms. Tufts would oversee human resources at the Department. This
work will become even more critical in the coming years, as
many in HUD's workforce near retirement age and with Trump
budget cuts, which I hope that you will do all you can
internally with the Secretary to oppose those cuts.
If confirmed, the nominees before us today would oversee
rental assistance for 4.5 million low-income seniors,
individuals with disabilities, and families; manage the Federal
Government's primary mortgage insurance programs; and ensure
that HUD has the workforce necessary to deliver on this
important mission.
In addition, they are likely to have a hand in helping
families and communities from Texas to Puerto Rico--remember
Puerto Ricans are American citizens, something the White House
intermittently remembers and forgets--to help them recover from
some of the worst natural disasters the Nation has ever seen.
HUD will have a large role to play in ensuring that the
recovery is equitable, effective, and leaves our communities
more resilient to future disasters.
Given the importance of HUD's programs and HUD's mission,
it is disappointing the Administration has chosen to undermine
it with a 15 percent cuts in proposed cuts to HUD's programs.
Mr. Montgomery was at that agency and with a President that
actually understood HUD's mission and cared about HUD's
mission, and he knows what those budget cuts mean to his job.
Thank you for taking it in spite of that and still willing to
meet this challenge, and we are counting on you in so many ways
on these issues.
The budget would eliminate funding for 250,000 Section 8
Housing Choice Vouchers at a time when Federal housing
assistance reaches just one out of every four eligible
households.
Despite an estimated $26 billion backlog of repair needs,
the Administration proposed cutting the Public Housing Capital
Fund by nearly 70 percent. I am hopeful that the three of you
can teach this Secretary of HUD what that means. I am not sure
he understands it. He is a smart man but did not have a lot of
background in housing, and we are counting on the three of you
who understand these issues perhaps better than your boss.
While Secretary Carson has committed to advocate for
housing funds as part of an Administration infrastructure
proposal, we have yet to see any detailed infrastructure plan
from the Administration and no mention of housing in even the
loose outlines it has released.
I forward to hearing from each of the nominees about how
they would approach the important roles for which they have
been nominated.
I would close with suggesting to each of you before you are
confirmed, assuming that the three of you likely will, that you
read Matthew Desmond's book, ``Evicted''. When I met with him
and I asked him to sign the book that I had actually
purchased--I want you to know that--he wrote on it--he wrote
``Home equals life''. And the importance of public housing, the
importance of every American having a clean, decent, affordable
place to live is about as basic and great as anything any of us
can do. I know you take that role seriously, the three of you,
from looking at your backgrounds and discussions you have had
with staff.
We have a lot to do. Thank you.
Chairman Crapo. Thank you, Senator Brown.
We will now administer the oath, and would each of you
please rise and raise your right hand. Do you swear or affirm
that the testimony you are about to give is the truth, the
whole truth, and nothing but the truth, so help you God?
Mr. Montgomery. I do.
Mr. Kurtz. I do.
Ms. Tufts. I do.
Chairman Crapo. And do you agree to appear and testify
before any duly constituted Committee of the Senate?
Mr. Montgomery. I do.
Mr. Kurtz. I do.
Ms. Tufts. I do.
Chairman Crapo. You may be seated.
As I am sure you have been already advised, your written
statements will be made a part of the record. We ask you to try
to keep your testimony to 5 minutes so the Senators will have
an opportunity to use their 5 minutes for questioning, and
before you begin your statement, each of you are certainly
invited to introduce your family who are here in attendance
with you.
And with that, Mr. Montgomery, please proceed.
STATEMENT OF BRIAN D. MONTGOMERY, OF TEXAS, TO BE ASSISTANT
SECRETARY FOR HOUSING, FEDERAL HOUSING COMMISSIONER, DEPARTMENT
OF HOUSING AND URBAN DEVELOPMENT
Mr. Montgomery. Thank you, Mr. Chairman
I would like to introduce my wife, Katy, and my daughter,
Emily, who just turned 11 on Sunday--she will tell you that, do
not worry--and Thomas, my son, who is 8 years old. Thank you
all for being here.
Well, thank you, Chairman Crapo, Ranking Member Brown, and
all the Members of the Committee. I am honored to appear before
you today to once again to be considered as HUD's Assistant
Secretary for Housing and Federal Housing Commissioner, and I
am grateful to the President and Secretary Carson for their
confidence in my abilities to serve in this position.
I was humbled by the confidence this Committee placed in me
12 years ago, and I sincerely hope that I earned your trust
between 2005 to 2009 and when I previously served as
Commissioner, including 6 months into the Obama administration.
Some of my Republican friends still ask me why I agreed to
serve in a Democratic administration, and my answer, quite
frankly, has always been the same: ``They asked for my help.''
It was literally that simple. Now when I am asked why would I
want to return to HUD, the answer is just as simple: ``I
believe I can make a positive difference.''
Public service is an honor that I take very seriously, and
if confirmed, I will do my best to, once again, further equal
access to affordable rental, housing, and home ownership
opportunities, and seek solutions to restore vitality to the
housing market.
During my tenure at HUD, I am proud of the work we did to
preserve FHA as a viable option for homebuyers. Working with
this Committee, we were able to pass the Housing and Economic
Recovery Act of 2008. That legislation placed FHA on sounder
financial footing by kicking out the seller-funded down-payment
programs that were hurting borrowers and decimating the FHA
Fund of more than $15 billion.
We were also able to expand home ownership opportunities by
giving borrowers, especially minorities and first-time
homebuyers, a safer option than the subprime loans that were so
prevalent back then.
FHA played no role in the housing boom or the collapse, but
it was FHA, quite frankly, that stepped in and provided more
than a trillion dollars in mortgage liquidity that helped more
than 8 million families purchase or retain their homes between
2008 and 2012, and I am extremely proud of the effort that the
HUD career staff played in that role.
Putting an exclamation point on that role, one noted
economist said in 2011, quote, ``If FHA lending had not
expanded after private mortgage lending collapsed, the housing
market would have cratered, taking the economy with it.''
Well, nearly 10 years after the housing collapse, there is
still much work that needs to be done. The home ownership rate
today is the same as it was in 1968, and there is too little
affordable rental housing in too many communities across
America. In fact, HUD's latest ``Worst Case Housing Need''
report that was released in August indicated that in 2015, the
most recent data, more than 8.3 million low-income households
not receiving housing assistance paid more than half of their
income in rent.
But getting back to housing, home ownership for many, while
the market continues to recover, far too many creditworthy
borrowers, many of them prospective first-time homebuyers and
minorities and young families, in my opinion, are being left
out.
The Urban Institute has estimated that more than 6 million
more mortgages would have been made between 2009 and 2015 if
credit standards had been similar to what they were in the
reasonable ones in 2001, well before the housing boom. One
reason for the tight credit environment is that many lenders
remain very sensitive about defaults and claims out of fear of
enforcement actions.
Just to be very clear, fraud and misrepresentation have no
place in any industry, much less the one that represents the
largest investment families will ever make. We must do a better
job of providing regulatory clarity to mortgage lenders, but
quite frankly, I think it is time we start treating them more
like partners than adversaries.
Another key part of FHA's mission is to support safe and
affordable rental housing. During my previous tenure as
Commissioner, we made unprecedented changes to leverage private
capital with Federal resources in order to increase the supply
of quality rental housing for people with limited incomes.
I was pleased to see Secretary Donovan and his team
continue that important objective and greatly expand it, I
would add.
But as rental cost, house burdens begin to grow and worst-
case housing needs remain unmet, there is more work that needs
to be done. I also believe nonprofit organizations who are at
the forefront of developing housing solutions could be better
utilized at FHA.
Another high priority is FHA's technology. I think it is
time to address the outdated systems there. The GSEs have been
able to spend millions of dollars upgrading their technology,
but as I like to say, FHA is still looking for loose change
under the sofa cushions. And that has to end.
FHA and Ginnie Mae generate billion dollars in receipts,
and I think they should be able to use some of that to fund IT
improvements. Doing so will help reduce the financial risk to
taxpayers and ensure that FHA can operate on a stable platform
for years to come.
I thank the Committee for your time today and my
consideration as nomination of FHA Commissioner, and I look
forward to answering your questions. Thank you.
Senator Brown [presiding]. Thank you, Mr. Montgomery.
Mr. Kurtz, welcome, and feel free to introduce anyone you
want.
STATEMENT OF ROBERT HUNTER KURTZ, OF VIRGINIA, TO BE ASSISTANT
SECRETARY FOR PUBLIC AND INDIAN HOUSING, DEPARTMENT OF HOUSING
AND URBAN DEVELOPMENT
Mr. Kurtz. Sure. Thank you. Thank you, Chairman Crapo,
Ranking Member Brown, and Members of the Committee. I am
humbled and honored to appear before you today as you consider
my nomination to serve as the Assistant Secretary for Public
and Indian Housing at the U.S. Department of Housing and Urban
Development.
I want to extend my sincere thanks and gratitude to
Secretary Carson for recommending me for this position and
President Trump for nominating me.
Joining me today are my wife, Abby; my two boys, Liam and
Henry; my parents, Bob and Candy; my brother, Chase; my sister-
in-law, Autumn; and my cousin, Debbie.
As well, I want to thank my friends from HUD who are here
today watching this--and watching this hearing, both career and
political employees.
Having served at the Department as a political appointee in
the Bush administration, a career civil servant during the
Obama administration, and now again as an appointee in the
Trump administration, I believe I bring a unique background and
diverse perspective to the position for which I am nominated.
Additionally, I worked for the city of Detroit, where I
interacted with many of HUD's programs. I am a houser at heart,
a practitioner of HUD programs, and a true believer in the
mission of the Department. I have seen firsthand what we can do
with HUD programs, but I have also had the opportunity to help
craft rules and regulations that I have then had to implement
at the local level. And I can affirm that what I thought was a
good idea in my chair in Washington made a lot less sense when
sitting in my seat in Detroit.
My time at the city of Detroit, in many ways, was
inspirational. I was blessed to work with an incredible team to
help turn around a housing department considered among the
worst performing in the Nation. In conjunction with the Mayor's
office, private-sector developers, and the City's Housing
Commission, we began the development and production of safe and
affordable housing for the city and its residents.
While the renaissance that is now taking place in the city
of Detroit is something which I am extremely proud, the real
reward for me is seeing the joy on the faces and individuals
that we were able to help. They will always be a reminder of
what we do in public housing and public service on a day-to-day
basis. We help people.
One of the fundamental lessons I have learned in working
with the City was not only the impact of the policies we create
at HUD and in Washington, but that a one-size-fits-all approach
to creating more sustainable, affordable housing does not work.
The issues that Detroit faces are different than those
faced by Seattle, Boise, and the tribal lands. We should give
serious thought to allowing public housing authorities more
control of how they manage their portfolios and how to find
unique ways to address their own housing needs. The people who
know best are the local officials managing the local PHAs, and
we should provide them with the tools they need to address
their own unique issues. If confirmed, this will be a major
goal of mine, and I look forward to working with you all to
make it a reality.
The Nation is facing an affordable housing crisis, and we
cannot just build our way out of it. Today, only a quarter of
those who are eligible for housing assistance actually receive
it. We must find ways to graduate residents from public housing
and put them on a path to achieving greater economic mobility
and self-sufficiency, which allows us to serve others that need
our assistance. This is a priority of Secretary Carson, one in
which I wholly and enthusiastically support.
If confirmed, I look forward to building on the successes
of our current programs while working with the Secretary to
implement new and innovate ways to achieve HUD's mission.
While I have spent some time discussing public housing
programs, I would also like to let the Committee know that, if
confirmed, I will also focus on the Native American programs
that are such an integral part of the work that HUD does in the
Office of Public and Indian Housing.
I had the opportunity to travel to Indian Country with
Secretary Carson earlier this year in my current capacity and
appreciate and understand the needs of our tribal partners.
Please know that I will continue to work with our tribal
partners--and I want to stress the ``with our tribal
partners''--to ensure safe, decent, and affordable housing for
these communities.
If confirmed, I look forward to working with the Members of
this Committee to help improve the lives of those Americans who
rely on programs managed by the Office of Public and Indian
Housing.
Thank you again for your consideration of my nomination,
and I look forward to your questions.
Senator Brown. Thank you, Mr. Kurtz.
Ms. Tufts, welcome, and feel free to introduce whomever you
want. Thank you.
STATEMENT OF SUZANNE ISRAEL TUFTS, OF NEW YORK, TO BE ASSISTANT
SECRETARY FOR ADMINISTRATION, DEPARTMENT OF HOUSING AND URBAN
DEVELOPMENT
Ms. Tufts. Thank you, Ranking Member Brown, Mr. Chairman,
and distinguished Members of the Committee. It is a great
privilege to appear before you this morning. I am deeply
honored that President Trump has nominated me to serve under
Secretary Carson as the Assistant Secretary for Administration
at the United States Department of Housing and Urban
Development.
I would like to introduce my husband of 35 years, Bob
Tufts, and our wonderful daughter, Abby, no relation to his
Abby. I also would like to thank my extended family, friends,
my former colleagues for their love and support.
One does not receive an opportunity like this without years
of help from many people, and that is certainly the case for
me.
There are two people who could not be here today, but
without whose courage and life experiences, I would not be the
person I am or have the passion for public service that I do--
my late parents, Abraham and Henriette Israel. Born in Europe,
they were living in Antwerp when, on the morning of May 10th,
1940, they awoke to enemy aircraft overhead and an invasion
forcing them to flee. For the next 10 years, until they came to
the United States, they were homeless and lived wherever they
could find a roof over their heads--in barns, in the back yards
in the open air of peasants in the countryside who gave them
shelter, and even one night sleeping under the pews of a church
in France. As the only child of Holocaust survivors, making a
difference and working in mission-based endeavors has been a
guiding force in my life.
However, I have long believed that passion does not produce
results without having an administrative and human resources
support infrastructure.
I bring to bear three categories of skills and experience
that I believe will help HUD improve its operations: first,
experience in turnaround management and leadership development,
particularly in mission-based organizations; second, experience
in the field which makes me sensitive to HUD's ultimate
customers; and third, experience as an outside-the-box creative
thinker, someone who has strong analytical skills and the
ability to both plan and implement with energy and enthusiasm.
I gained these skills and experiences across many silos,
including law, management, consulting, recruiting, and
training. I served as the Regional Director at Region II of
ACTION, currently the Corporation for National Service, where I
not only worked with HUD on a variety of tenant empowerment,
literacy, and microenterprise programs, but where I led the
region in improving its service delivery.
I have also served as the president and CEO of the American
Women's Economic Development Corporation where I led the
turnaround of a beloved but beleaguered organization. Our team
succeeded in eliminating the organization's 10-year-old debt
while privatizing funding and improving the organization's
services, including online training. We spearheaded a
nationally recognized entrepreneurship program for women living
in the New York City Housing Authority in which 65 percent of
program participants achieved financial independence and
business success.
But I believe AWED's most significant service was rendered
after the 9/11 attacks, where within 72 hours, AWED provided
emergency business relief and other services for our students,
faculty, and alumni located in the Ground Zero area, efforts
that earned the organization bipartisan recognition.
My parents were able to make a wonderful life in this
country, a life that started with a stable, affordable rental
home in a safe, secure neighborhood, a home or rather an
apartment which in time my husband and I as a young married
couple were able to purchase and to raise our daughter. I can
think of little that would be more meaningful than to help
others find the same path to a better life for themselves and
their families that my parents did.
If confirmed, I will work hard to ensure that HUD's
administrative and human resources services are best directed
to fulfill its important mission.
Mr. Chairman, distinguished Members of this Committee,
thank you again very much for your consideration of my
nomination. I am honored, and I welcome your questions.
Chairman Crapo [presiding]. Thank you very much, Ms. Tufts.
I apologize to the witnesses. I had to step out for a
minute. There is an important markup going on that I may have
to step out again for, but I deeply appreciate your
participation here.
I am going to yield my question period to Senator Corker.
Senator Corker. Well, thank you, sir. You missed some
outstanding testimony.
Thank you all----
Chairman Crapo. I will review it.
Senator Corker. Thank you all for being here. We appreciate
your desire to serve publicly and to help our Nation, and
obviously, the areas you are serving, will be serving in, are
very, very important to all of us.
I am going to focus my comments to Mr. Montgomery. We
welcome you back, and thank you for your willingness to do
this.
We have been struggling for years, maybe 9, to deal with
some of the housing finance issues that our Nation is dealing
with. I know you are very familiar with those, and I am hopeful
that our Committee under Chairman Crapo's leadership--I know it
is his desire and Sherrod Brown--our Ranking Member's desire to
actually deal with the Fannie and Freddie components of housing
finance reform, overseeing about $5 trillion in assets, and I
hope that soon we are going to be able to do so on a bipartisan
basis.
Where we are today is probably not sustainable for the long
haul, and it is long overdue. We have got an opportunity, I
think, to do something very constructive.
But part of that is when you look at housing finance
reform, you have to look at FHA. If you squeeze the toothpaste,
you know it comes out in another place, and really the two
likely, probably, and actually should be dealt with together.
Would you agree with that?
Mr. Montgomery. Absolutely, Senator. I do not think you can
discuss what you do with the GSEs without pulling the FHA into
that discussion as well.
Senator Corker. If I remember correctly--and I have been
around here a long time, just a little under 11 years--I think
you came in at a time to help us when we had some crises to
deal with. Maybe I am wrong. I think that is right; is that
correct?
Mr. Montgomery. Yes, Senator. I was confirmed in June of
2005, so I was there during the housing collapse and certainly
when the recovery was taking hold.
Senator Corker. Yeah. So I think you probably have some
notions of some of the reforms that might be helpful at FHA
itself. I wonder if you might just speak to some of the things
that you would like to see us take on here.
Mr. Montgomery. Certainly. Thank you.
Establishing what the role of FHA should be, I think we
have learned it has been an amazing agency that stepped in, in
times of economic downturns, whether it was in the '80s during
the oil-patch States. We certainly saw the role that FHA played
after the housing market collapsed.
This Committee and the House provided higher loan limits.
They increased, obviously, the minimum cash investment,
concerned about certainly the FHA Insurance Fund.
But going forward, first off, it is not a level playing
field. If you are looking at the GSEs, again, they have made
overwhelming investments in technology. Good for them. But FHA,
again, their systems are--one of them, the CHUM system was just
sort of the backbone of everything FHA does. I believe it runs
on a Wang mainframe. That technology is at least 30, 40 years
old.
You also have the False Claims Act, which has run a lot of
the larger banks away from the FHA program. I am not saying you
should look the other way when there is fraud or
misrepresentation, but I hope we have a serious discussion
about whether or not the False Claims Act is the right tool
going forward.
So I think you have to get them on a level playing field,
and then do you want FHA--we need to look at the premiums. Are
they where they should be? The cash investment, is it
appropriate? Should it be just for first-time homebuyers?
Again, there is a lot of questions.
As a private citizen, I have some opinions. If confirmed, I
will obviously look forward to discussing those with this
Committee.
Senator Corker. And that would be--thank you for the input
you just gave, and I know you probably want to be confirmed and
then speak more fully about those. And I hope you are
confirmed, and I think you will be.
So working with us, though, to work through the components
that ought to be at the FHA and the components that ought to be
at the GSEs, that would be interesting to you and something you
would like to see happen for the good of our country?
Mr. Montgomery. I never thought in October of 2008 when I
was in this position that 9 years in the future, we would still
be in conservatorship, but here we are.
I mean, there are some deadlines, obviously, facing more of
the GSEs, next year their operating budgets when they are swept
down to zero. The GSE patch on the Qualified Mortgage Rule, I
believe expires in 2021, and they are supposed to have plans in
place in 2019. So there are some deadlines coming that I think
will require some action.
Senator Corker. Well, listen, thank you, and thanks to all
three of you for your agreement to serve in these capacities,
and I look forward to working with you.
Thank you, Mr. Chairman.
Chairman Crapo. Thank you.
Senator Brown. Thank you, Mr. Montgomery.
In previous testimony before this Committee, you stressed
the importance of stable FHA-insured mortgages, and you said--
and I will quote--``While low initial monthly payments may have
seemed like a good thing at the time, the reset rates on some
interest-only loans are substantial, and many families have
been and will continue to be unable to keep pace when the
payments increase,'' unquote.
Answer this, if you would. How does FHA underwriting differ
from the underwriting on the interest-only or adjustable-rate
mortgages offered by lenders leading up to the crisis, and why
do those differences matter?
Mr. Montgomery. Well, they matter a fair amount. The
hallmark of FHA has been their underwriting. Certainly, the
technology improvements would help that, but every FHA loan is
fully underwriting, as outlined in the FHA handbook. We did not
see that during the housing boom on too many loans. The
interest-only loan had previously been used more by higher-
income borrowers. We saw it, in my opinion, abused during the
housing boom, and again, I think the difference between those,
too, is pretty profound.
Senator Brown. And had incredible consequences.
Mr. Montgomery. It absolutely had incredible consequences.
Senator Brown. Yeah.
Let me ask you something else. Thank you for talking about
your work 10 years ago and what happened and what we need to be
cautious about. You spent the past 8 years, Mr. Montgomery,
helping companies, including some of the largest banks and
reverse mortgage lenders push back against HUD enforcement
actions and avoid penalties. You have also served and continue
to serve on the board of directors for large private companies,
at least one of which has lobbied us recently as this year on
the role of FHA.
Your employer, the Collingwood Group--you and your employer
both have been highly critical of FHA oversight. You have
called FHA enforcement of its lending policies using the False
Claims Act a, quote, ``drone strike,'' unquote, of sorts
against FHA lenders with devastating results. Your Collingwood
Group cofounders referred to mortgage reforms enacted in
response to the 2008 crisis as a regulatory jihad.
If confirmed, how can we be certain that your work over the
past 8 years will not influence your oversight of lenders and
your vision for the FHA programs?
Mr. Montgomery. Well, thank you for your question. Just to
be clear, I have not questioned FHA's role, enforcement role.
The problem has been the Justice Department has stepped right
in front of the FHA and, quite frankly, in many instances
pushed them aside, in many instances did not really much care
about their opinion. The FHA staff had one opinion about
whether or not a particular loan had some issues with it, but
the Justice Department stepped in and used the False Claims
Act. And that is what I was referring to, which has been around
since the Civil War, to punish contractors selling diseased
beef or diseased horses, rather, to the Union soldiers.
We took exception to how it was used 150 years later to go
after FHA lenders, which in my instance was many times for
clerical errors. Our firm was involved in some of those cases,
doing loan file reviews, and many times took exception to what
the Government was asserting.
I want to be very clear here. FHA has a role in
enforcement. What we saw happen was the Justice Department
stepped right in front of them and quite frankly ran the
biggest banks, some of which who had been FHA lenders for 50,
60, 70 years--they no longer offer the product, and I do not
think that is good for a lot of lower-income first-time
homebuyers who have a banking relationship with that entity,
who want to take out an FHA loan, and are told today, ``We
cannot help you.''
Senator Brown. I appreciate you have agreed to divest
yourself of all financial conflicts, if confirmed, but will you
recuse yourself from any issue involving Collingwood's clients
or the companies for which you served on the board?
Mr. Montgomery. Yes, sir. All that is spelled out in my
ethics agreement, and I will certainly live by everything that
is required of me, absolutely.
Senator Brown. Thank you.
Mr. Kurtz, you spoke passionately about the importance of
housing for low-income folks in this country, and you mentioned
only one out of four has affordable, relatively affordable safe
housing. The Administration's budget proposed large cuts to
programs you would administer. These include deep cuts to
public housing capital and operating funds and eliminating of
Choice Neighborhood grants.
How do you think these cuts would affect HUD's mission of
providing safety and affordable housing to current and future
residents? Public housing, I know you are going to say public-
private partnerships. That is sort of always the answer, but
can you have public-private partnerships? That is a second part
of this question, really. Can you have public-private
partnerships without a major infusion of public involvement and
public dollars?
Mr. Kurtz. The budget was an attempt to begin a
conversation about reforming public housing. We are at a stage
where I think if we all sat down and created a system to house
individuals, lower-income individuals, this is really not the
system that we would create, and there really needs to be an
attempt to reform it, so it is sustainable for the future and
sustainable for the individuals living in those homes
currently.
Senator Brown. But you honestly think you can--with that
kind of--the severity and the depth of those budget cuts, we,
of course, want a new--we want a conversation. We want to look
at this anew. We want fresh eyes. That is part of the reason I
voted for--I voted to confirm Secretary Carson, that and his
knowledge of lead and how lead content affects brain
development, and it is far too common in low-income homes, low-
income people's homes.
But how do you--you have that conversation, but how can you
do this with this kind of a budget when there just are not the
dollars available for these public-private partnerships?
Mr. Kurtz. I mean, in any situation where you are looking
for funding, it is something that we dealt with in Detroit all
the time. You have got to--you just have to be creative in the
ways that you find what works. I always refer to it as sort of
cooking a coup. You put a little bit of this in and a little
bit of that in. It is all the different pieces.
So, in some cases, you might not have as much of one, but
you find other resources and other ways, whether they are on
the local level or the State level, to try to make up for that
difference.
Senator Brown. Well, it helps to have some vegetables and
meat to actually put in the soup, so fair enough.
[Laughter.]
Chairman Crapo. Thank you.
Ms. Tufts, could you just tell me what your top two or
three priorities would be in your new role?
Ms. Tufts. Thank you, Mr. Chairman.
My overall priority is to reimagine the way HUD works, to
deliver timely and effective services to our employees, our
partners, ultimately our customers.
Within that, there I really see three, three priorities.
First is to fix our human resource processes so that we can
recruit, develop, and maintain a highly engaged, high-
performing, and very diverse workforce; second, to improve our
administrative service so they can operate more effectively and
intersect more effectively not only with our human resources
but across our program officers, such as those represented by
the gentlemen here. The third would be--and this is something I
am particularly interested in as well--is to look at and
improve and find creative ways to deal with our physical
footprint, which is not only in need of serious refurbishment,
as are indeed many of the housing authorities out in the field,
but where I am intrigued and I think there may be some great
opportunities for cost savings. So it is really those three:
improve HR, improve administrative services, and creatively
look at our physical footprint.
Chairman Crapo. Thank you.
And, Mr. Kurtz, HUD's Rental Assistance Demonstration
program, or RAD, has emerged in recent years as a great
opportunity to utilize public-private partnerships to convert
outdated and dilapidated public housing into units that are
more livable, safer, and are no longer on the Government's
balance sheet. Based on your experience, should Congress
continue to pursue expansions to the RAD program?
Mr. Kurtz. I believe so. Yes, sir.
Chairman Crapo. All right. Thank you.
And, Mr. Montgomery, first of all, I want to follow up on
Senator Corker's comments. I agree with him that housing reform
is badly in need, and it is one of our high priorities. And I
appreciate your comments about the fact that the FHA needs to
play a role in that as we address the entirety of our needs in
housing reform.
I have a question to you, however, with regard to
litigation. Over the past couple of weeks, Secretary Carson has
indicated that the FHA plans to work with the Department of
Justice to clamp down on the number of False Claims Act
litigation claims brought against FHA lenders for what are
often harmless or immaterial processing errors. Can you speak
to the importance of this issue, and what steps do you plan to
take with FHA to address that problem?
Mr. Montgomery. Absolutely, Senator. Thank you.
I--again, just to be clear on this point, fraud and
misrepresentation has no place in FHA lending, the Quality
Assurance Division staff at FHA do a tremendous job in that
respect.
But when you have many times administrative or clerical
errors in the manufacture of a loan file--in one case, for
example, there was missing GIF letters. We saw that fairly
often. And 7, 8, 9, 10 years later, the borrower defaults
because he or she lost their job, you know, change in economic
status, if you will. And the Justice Department comes back and
says, ``Where is the GIF letter?'' and they said, ``Well, the
loan went to default because the person lost their job.'' And
they said, ``Well, you said that this was accurate, that it was
complete, and there is no GIF letter.'' Again, that is a
violation of FHA rules, but I do not think it is treble damages
plus civil, mental--civil money penalties, which is in many
cases what happened.
At last count, there were some $5 billion in settlements.
There is, you know, at least in reading public stories, one
lender is currently fighting it. A lot of the banks that
settled were also subject to the FIRREA statutes. I am assuming
because of that, many of them decided to settle.
But again, they have all been around the FHA program. They
probably ask themselves: How do you reserve for the unknown
times three? And the path to home ownership goes through banks.
It goes through credit unions. It goes through mortgage
lenders. You absolutely have to have them. But if the goal post
keeps getting moved on them, I completely understand why they
have left the FHA program, but I think they should come back. I
think all they want is some certainty, ``If I follow your
rules, you are not going to come back 7, 8, 9, 10 years later
and say, `You did not do this perfectly. Why is this missing or
that missing?' '' And we have seen what has happened as a
result of that.
Chairman Crapo. All right. Thank you.
And just finally, in my last 30 seconds, back to housing
reform. As I indicated, housing reform continues to be a top
priority for us, this Congress, and as we examine these
opportunities as to how to deal with Fannie and Freddie and
terminate the conservatorship and how to deal with the FHA, I
would just like your commitment to work with us and our staff
on this to help us to get to the answer and to get there
quickly.
Mr. Montgomery. If confirmed, I will absolutely provide
whatever assistance I can. Thank you.
Chairman Crapo. Thank you.
Senator Tester.
Senator Tester. Yeah. Thank you, Mr. Chairman and Ranking
Member Brown.
I want to go back to the affordable housing programs. Both
Mr. Montgomery and Mr. Kurtz spoke about the need for
affordable housing programs. I am sure you have taken a look at
the Trump budget, which would eliminate home funding, Housing
Trust Fund, CDBG funding.
To put this from a Montana perspective--and it is has to
make blank statements, but I think I could make a pretty solid
statement that any community over 8,000 people in Montana needs
affordable housing. And it stopped the ability for economic
development. It has stopped the ability to hiring new people so
existing businesses can expand. It stops the ability to recruit
new businesses to a town.
So the question becomes--you guys said all the right
things, and by the way, this budget, I would say came from
President Trump but was shepherded by Dr. Carson. And he said
some things--and I voted for his confirmation too, but he said
some things since his confirmation that makes me wonder if his
heart is really in housing or if it is in education. For
example, when he came to Montana and talked to the Indian
tribes--and we were glad to have you there, Mr. Kurtz--housing
was not even talked about. It was talked about education.
And so the question becomes how do you guys--because I
think both of you want to see an effective affordable housing
program. How do you do that when potentially the two guys above
you are not really bought into it?
Mr. Montgomery. I could go first. Well, thank you for your
question.
As a private citizen, obviously I was not involved in the
development of that budget.
Senator Tester. No, no.
Mr. Montgomery. But I can speak previously when I served in
this capacity. I can very much assure this Committee had a lot
of input into the budget, and there were some things throughout
the budget-making process back then I did not agree with,
particularly cuts to 202 and 811----
Senator Tester. Right.
Mr. Montgomery. ----which I fought vociferously for. And if
confirmed, I will do that again.
Senator Tester. And so the question really becomes--is what
happens if your boss comes down and says, ``You know what?''--I
am talking about Dr. Carson or even the President comes down
and says, ``You know what? We do not want you to invest any
money in affordable housing,'' because that is what that budget
says. What do you do?
Mr. Montgomery. Well, I will tell this Committee that I
will make sure--I will advocate my position strenuously, but at
some point, if you do not get what you need, you just have to
go forward and do what you can.
Senator Tester. Mr. Kurtz, do you want to respond to that
too?
Mr. Kurtz. Sure. Working with Secretary Carson in my
current position, I do believe that he is an advocate of
housing. He is--you know, it is a subject of conversations
always, what we deal with on a day-in-and-day-out basis.
But at the same time, he does see that there is--you know,
I think it comes from his medical background. You cannot just
look at the one symptom. You have to look at the patient as a
whole, is how he likes to describe it, and working to not just
provide housing, but the wraparound services that we need to
provide to ensure that we can graduate people out of public
housing.
You know, it goes back to the comments I was making on that
we are only housing a quarter of the people eligible.
Senator Tester. I gotcha, but here is the problem in the
communities that I talked about in Montana. There is no
housing. There is no affordable housing. None, zero, nada.
People want to buy it. They cannot buy it because, quite
frankly, there is none.
And so the real question is if we are going to have
economic development, if in fact we are going to move the
economy forward, a lot of these communities--and they are small
communities by U.S. standards--need help. It is not going to
happen without the Federal Government providing some sort of
assurances that they can move forward.
So the question becomes--I hear what you are saying, but I
think this is a different issue. I think this is affordable
housing. There are customers there for it if you can get it
built, and quite frankly, these programs, if in fact they end
up zeroed out, are not going to address that issue of
affordable housing.
Mr. Kurtz. I mean, it--one of the other questions I was
answering earlier, you know, in my experience in the city of
Detroit, we never--there was never enough resources. We were
always having to come up with new ways to come up with
resources.
Senator Tester. I gotcha.
Mr. Kurtz. And, you know, public-private partnerships,
creative opportunities with nonprofits, these were things we
were always trying to develop and use.
Senator Tester. I just do not--and I will just tell you, in
this budget the President put forward--and it is why I think
that you guys need to push back hard, and I heard Mr.
Montgomery say he would, and I hope you will, too, Mr. Kurtz--
that you are not going to get blood out of a turnip. It really
is going to require somebody that advocates and knows what they
are doing.
In Indian housing--and I appreciate you being in Montana,
Mr. Kurtz, but very quickly--and this is not--however you
answer this does not matter. I just want to know. Have you had
a chance to take--you were dealing with large land-based tribes
in Montana. Have you had a chance to visit some of the tribes
across the country to see what their housing needs are?
Mr. Kurtz. I have not, and if confirmed, it is something I
want to do.
Senator Tester. We would be more than happy to try to help
you with that in Montana if we can set up connections for you.
Thank you, Mr. Chairman.
Mr. Kurtz. Appreciate it.
Chairman Crapo. Thank you.
Senator Kennedy.
Senator Kennedy. Thank you, Mr. Chairman.
Congratulations to all three of you.
I would like you to help me figure out a problem. In
Louisiana, we, of course, have an affordable housing program,
as does every State, and we use Federal tax credits. And there
is public-private partnership that I think has worked
beautifully, in my judgment, but it is not perfect. And here is
one of the problems I see in my State and in other States.
And let me preface my explanation, the problem, by saying
here is my goal--to take hard-earned taxpayer dollars and get
as many people as we can who need help into decent,
comfortable, affordable housing.
Here is the problem. Many State housing boards that
administer these credits, they want to help those of our
citizens, as do we all, who are less fortunate than we are, and
in doing so, the standards for the housing become higher and
higher and higher. In other words, they make private developers
compete for the credits. Are you following me so far?
And a lot of the private developers, in order to get
support from the local housing boards, add things like granite
countertops, a lot of amenities that are wonderful to have, but
they cost money. They use up credits.
We have seen projects in Louisiana on occasion at 2-, 3-,
$400 a square foot for affordable housing, and I am sitting
there doing the math. And I am figuring, well, let us see. We
can help 10 people with $400 a square foot. How many people
could we help at $200 a square foot? Now, $200 a square foot is
not as nice as $400 a square foot, but it is not chopped liver.
How do we solve this problem?
I am not faulting anyone, but my interest is helping as--
stretching those dollars and helping as many people as we can,
and we can help a lot more if we would be a little reasonable.
I would like your thoughts on that, starting down--let me
start with this nominee first.
Ms. Tufts. Senator, thank you.
I am going to--I am focusing mostly within HUD on a similar
kind of thing, which is the administrative services and the
physical plant and how do we have places like the Weaver
Building, which is historical and has all sorts of regulations
around it and yet has fallen so far down, and it is really a
morale crusher, to be frank, in terms of the quality of what we
can deliver as far as the workforce.
And yet, hopefully, I will be confirmed and I will be
digging into the budget to see what is there available and what
is the right level of excellence and of morale and workplace
excellence that does not exceed and does not have the taxpayers
in your State saying, ``Why are you spending all this money on
people in Washington?''
So I hear you exactly in terms of what the tension is, but
I think I am going to take the easy way out, sir, and defer to
my colleagues who are in the program offices and who know about
the funding and the regulations.
Mr. Kurtz. You know, I am obviously a fan of just building
as much affordable housing as possible. You know, we--as I
mentioned earlier, we are only----
Senator Kennedy. Keep going.
Mr. Kurtz. We are only housing a quarter of the individuals
that are eligible for public--or affordable housing, and, you
know, anything we can do to expand the amount of affordable
housing available is a good thing.
Mr. Montgomery. I am not familiar, Senator, obviously with
Louisiana. I will be.
But in terms of a tool, the Low-Income Housing Tax Credit
has received broad bipartisan support. I understand there is a
bill to actually increase the tax credit 50 percent. It works
very well with FHA programs, certainly with the multifamily
programs, the subsidy layering requirements, and obviously with
the Rental Assistance Demonstration program.
I agree we should be able to stretch those dollars and try
to develop as much housing as possible.
Senator Kennedy. I support the credits, but they did not
just fall from heaven.
Mr. Montgomery. Absolutely.
Senator Kennedy. We thank heaven for them, but they came
out of people's pockets, taxpayers. And I sure would like your
help in stretching those dollars.
Mr. Montgomery. Absolutely.
Senator Kennedy. Thank you, Mr. Chairman.
Chairman Crapo. Thank you.
Senator Cortez Masto.
Senator Cortez Masto. Thank you, Mr. Chairman.
Welcome. Thank you all for your willingness to serve and
then serve again, and welcome to your families, beautiful
families, and very impressed they have all been sitting there
very quietly and listening to this exciting conversation.
Let me just start with Mr. Montgomery. I want to jump back
to some of the conversation that I have heard with respect to
FHA and False Claims, and the reason I ask is because I need a
little bit more clarification. I am hoping you can help me.
So when I was Attorney General in Nevada, 48 of my
colleagues and I settled a $25 billion lawsuit with the
Nation's largest banks to address their egregious behavior
related to mortgage servicing, robo-signing, and foreclosure
abuses. That settlement included nearly $1 billion being
returned to the taxpayers for fraud upon the FHA under a False
Claims case.
Are you saying that that particular settlement, there were
clerical errors that should have been in there that should have
not been undertaken under the False Claims Act by DOJ?
Mr. Montgomery. So just to make sure I understand the
question, the State Attorney General settlement, I think was
right and proper. There were certainly a lot of abuses that, by
the way, the FHA had no role in.
Senator Cortez Masto. OK. So thank you, because I am trying
to understand what you identify as a clerical error.
So also, I also know that some of the biggest banks that
have been driven out of FHA lending did not engage in clerical
errors and loans sold to FHA. For example, I also am aware of
the settlement the U.S. Government had in the New York
settlement with Wells Fargo that alleged systemically lacks
underwriting standards and compensation systems that incented
churn over quality. Also, Wells Fargo failed to self-report bad
loans sold to HUD and uncovered in internal quality assurance
reviews. Are you saying those are not clerical errors, those
are severe that should have been brought under False Claims?
Mr. Montgomery. Just to be clear, when there are material
errors, certainly, there has been misrepresentation. Those are
not administrative clerical errors.
Senator Cortez Masto. So the one example that you cited,
that there was a GIF letter missing, are you telling me that
that was the one area, that was the one piece of evidence, a
GIF letter was missing, and that particular bank then was
charged under the False Claims Act and found guilty because of
that missing GIF letter?
Mr. Montgomery. Well, we many times saw that. The
Government would assert that would be a material error.
Senator Cortez Masto. Is that the only? Is that the only
material, or were there others?
Mr. Montgomery. No, there might be slight errors in
computation, computing, rather, income.
Again, my issue is not that those are not errors that the
lenders should certainly fess up to, pay a penalty or whatever.
My only concern was the use of the False Claims Act as a tool
to go after them, that, quite frankly, a lot of them--again,
these were loans that had been paid on for years, and because
there was no GIF letter 8 years ago, if the loan goes to
default because the person loses their job, the Justice
Department came back and said, ``Where is the GIF letter?'' To
me, there is no connection between the two.
Senator Cortez Masto. No. And I guess maybe we can--I can
explore this a little bit further with you. A False Claims
action was brought just because of a missing GIF letter, or
there were other areas that they----
Mr. Montgomery. Oh, certainly, there were other areas.
Senator Cortez Masto. OK. That is what I thought.
So I understand from a Bloomberg article that Secretary
Carson said the FHA and Justice Department are working to
clarify the rules so banks will not have to fear retaliation,
and the changes would let lenders avoid penalties for
immaterial errors.
Are you going to be involved in identifying those rules and
working with DOJ?
Mr. Montgomery. Well, certainly, if I am confirmed, I would
hope that I have input into that process.
Senator Cortez Masto. Have you had conversations with
Secretary Carson now or previously particularly in this
instance when he spoke to the Mortgage Bankers Association?
Mr. Montgomery. I did not speak to him before he talked to
the Mortgage Bankers----
Senator Cortez Masto. You have not had any conversations
with him regarding this particular position?
Mr. Montgomery. Oh. I spoke to him--I believe it was in
late December.
Senator Cortez Masto. OK. I absolutely have concerns about
what you identify as a clerical error and what you are looking
at because, listen, as Attorney General, False Claims Act came
through my office. I was the only one that could allow them,
and I can count on one hand how many times we went False Claims
Act. And I have worked with the DOJ. The only time this is
brought is because there is egregious activity, not clerical
errors that may be in part of it, but there is egregious
activity going on. And so I am very curious to see how you guys
are going to drill down on this and would like to work with you
to understand what you identify as a clerical error.
So I would appreciate working with you on that.
Mr. Montgomery. Absolutely, Senator, I will do that. Thank
you.
Senator Cortez Masto. Thank you.
Mr. Kurtz, Nevada, like everyone else I am hearing, has
affordable housing problems, and we need help. The Trump budget
cuts are not going to help any of us, as you have heard.
And I know my time is running out. I am going to submit for
the record to you some concerns I have with not only affordable
housing, the cost, and helping us in our communities, but what
you can do to really be an advocate for more funding that is
needed.
So I appreciate your willingness to work, and I hope you
are willing to work with all of us to address these needs as
well.
I know my time is up. The rest of my questions, I will
submit on the record. Thank you.
Chairman Crapo. Thank you, Senator.
Senator Schatz. Thank you, Mr. Chairman.
Thank you to all of you for your willingness to serve, and
thanks to all the families. I appreciate your willingness to
let them serve.
Mr. Montgomery, in your testimony, you discussed FHA's role
in addressing the housing supply crisis. This issue is acute
for low-income households across the country, but in Hawaii,
all but the highest-income households are affected. What
specific steps should FHA take to spur rental housing
construction, and what barriers does the Office of Housing face
in creating more housing opportunities?
Mr. Montgomery. Thanks for your question.
Obviously, you have heard me in my opening statement
reference the worst-case housing need, 8.3 million families
currently not receiving assistance, paying more than half of
their income in rent. That number is too high. There are not a
lot of tools FHA currently has to develop new housing.
As I referenced the tax credit earlier, in my opinion, I
think that program needs to be increased because it is
absolutely a great tool that works well with the FHA programs,
and we have to hold onto what we have. Preservation is a key
tool, and when some of these use agreements expire, many owners
in the case of project-based rental assistance have the
opportunity to opt out. And I think we need to make sure we
provide incentives so that they do not do that.
We already do not have enough affordable rental housing,
and as the home ownership rate went down and the inventory
obviously fell, that put pressure--or rather the market-rate
units that were being developed, no one was building much
affordable housing during that time, and it has manifested
itself in higher rents as well for everyone. So the two
definitely go hand in hand.
Senator Schatz. Do you want to talk about the Multifamily
for Tomorrow Transformation effort at HUD in terms of how well
it is going and if you plan to continue it?
Mr. Montgomery. Well, the Rental Assistance Demonstration
program is certainly a big of that--a big component of that.
The previous Administration should be commended--and Congress
for working with them on it and certainly in raising the cap as
well.
There is a $26 billion infrastructure hole on a lot of the
Nation's public housing, and I think the RAD program goes a
long way to help filling that.
I do want to make sure I add, though, that tenant
protections are certainly important in that. The tenants need
to make sure that they are well informed of what is going on
and that they have a voice in that process as well.
Senator Schatz. Do you plan to continue the Multifamily for
Tomorrow Transformation effort at HUD?
Mr. Montgomery. Yes. That is my current plan.
Senator Schatz. OK. That is your current plan.
Mr. Montgomery. Well, I am a private citizen.
Senator Schatz. Sure.
Mr. Montgomery. Absolutely. Once I get in there, obviously
there is a lot of programs to look at, but I absolutely will do
whatever I can to help increase the supply of affordable
housing.
Senator Schatz. Thank you.
Mr. Kurtz, thank you for your willingness to serve earlier
this year.
HUD released a report detailing the housing needs of Native
Hawaiians. The report indicated the affordable housing crisis
is particularly acute among Native Hawaiian. The report--which
I would like with the Chairman's permission to submit for the
record----
Chairman Crapo. Without objection.
Senator Schatz. ----also states that the Federal Government
has a unique Federal trust responsibility to Native Americans,
including American Indians, Alaska Natives, and Native
Hawaiians [https://www.huduser.gov/portal/publications/housing-
needs-native-hawaiians.html].
Given the existence of that special legal responsibility,
what steps do you plan on taking to improve housing outcomes
for Native Hawaiians, Alaska Natives, and Native Americans?
Mr. Kurtz. Specifically to the Native Hawaiian programs, I
know there is a bit of a backlog in the funding that they have,
and it is very reminiscent of my time in the city of Detroit.
We were a housing department with a lot of funding--or
expenditure issues in trying to spend the funds.
I am a big believer in having both the field office and
technical assistance provided to those folks to try to remove
barriers that they may be facing. It has to be a team effort,
and if confirmed, I hope to work to try to address those
issues.
Senator Schatz. Thank you.
My last question is for Mr. Montgomery. One of the first
acts of this Administration was to stop a reduction in a
mortgage insurance premium. I understand you do not want to
speak to the specifics of the MIP rate. I would like to
understand your position on the goal of the premium, generally
the MIP.
The Mortgage Insurance Fund capital ratio is now well above
the statutorily mandated levels, and the current premium will
continue to strengthen the fund's capital position. So do you
think that the goal of MIP should be to provide the fund with
adequate capital reserves to provide a profit for FHA or to
influence consumer behavior?
Mr. Montgomery. Well, I am certainly familiar with the
premium reduction. The capital ratio is going to be released in
a few weeks. I do not know what it is going to be. I suspect it
will continue its upward trend, but the last actuary review, I
think it was about 2.36 percent. As a comparison, when I was
Commissioner, it averaged almost 5.6 percent during my tenure.
And the totality, I think, as I mentioned before, we need
to look at the FHA program from an LTV perspective, from loan
limits, and absolutely from a premium perspective. There should
be flexibility on the up-front, on the annual loan limits,
whatever--to me, it is part of an overall discussion. But I
think there needs to be--at the proper levels, we make sure we
protect taxpayers.
Senator Schatz. Thank you.
Chairman Crapo. Thank you.
Senator Warren. Thank you, Mr. Chairman.
So, Mr. Montgomery, you have been nominated to run the FHA,
and FHA provides taxpayer-backed mortgage insurance, helps
millions of Americans buy homes they might not otherwise be
able to afford, and unless it is managed well, though, of
course, the FHA can expose taxpayers to risk of billions of
dollars in losses, so very important position here.
You have run FHA before, and now you want to go back and do
it again. And I want to pick up on Senator Brown's question
about what you have been doing since then. Your bio says you
served as Commissioner of FHA from 2005 until mid-2009. What
month did you leave?
Mr. Montgomery. If memory serves correct, I think I left on
July 2nd, 2009, a Friday.
Senator Warren. OK. I think Bloomberg thinks it is July
15th, 2009, but does that sound about right?
Mr. Montgomery. It was early July.
Senator Warren. OK.
Mr. Montgomery. It was not quite 6 months.
Senator Warren. And what month did you officially start a
new company called Collingwood Group?
Mr. Montgomery. It was about a month later.
Senator Warren. About a month later.
So 1 month after leaving FHA, you founded and became vice
chairman of this new company, and according to the Bloomberg
story, your company was, quote, ``known in the housing finance
industry as a specialist in helping firms navigate FHA-related
penalties and lawsuits.''
Now, Wells Fargo was a client of yours; is that right?
Mr. Montgomery. Yes, Wells Fargo was.
Senator Warren. Uh-huh. And in 2016, Wells Fargo paid $1.2
billion for defrauding FHA, and as part of the settlement,
Wells Fargo admitted that it had, quote, ``certified to the
Department of Housing and Urban Development, HUD, during the
period from May 2001 through December 2008 that certain
residential home mortgage loans were eligible for FHA insurance
when, in fact, they were not, resulting in the Government
having to pay FHA insurance claims when some of those loans
defaulted.''
Now, your company was known for helping firms navigate FHA
penalties. Your company had Wells as a client. So did your
company advise Wells in conjunction with the 2016 settlement
with FHA?
Mr. Montgomery. So that is a lot of questions, Senator, but
just to back up for a second, the Collingwood Group existed
before I joined the Collingwood Group. We just renamed the name
of the company that it was.
Senator Warren. So you do not call yourself a founder.
Let me just get to the question, though. My time will run
short. Did your company advise Wells in conjunction with the
2016 billion-dollar settlement with the FHA?
Mr. Montgomery. So our firm was involved in helping the law
firm that was representing Wells Fargo. I personally was not
involved.
Senator Warren. So I just want to make sure I have this
right. You were the head of the FHA when Wells Fargo submitted
thousands of fraudulent mortgages to FHA and cost the
Government millions of dollars, and then soon after leaving
FHA, you join this company making money advising Wells Fargo on
how to pay back the Government as little as possible for
defrauding the agency that you ran.
Now, let me ask another one. Mr. Montgomery, was U.S. Bank
also a client of yours?
Mr. Montgomery. So, by the way, there is about 5-year gap
in there between me leaving and us doing work for Wells Fargo.
Again, I was not involved in that case.
Senator Warren. But you did not pick up Wells Fargo as a
client until 2016? Is that what you are trying to say?
Mr. Montgomery. I am just guessing it was about 5 years
later, but again, I personally was not involved in that case,
myself----
Senator Warren. But the period of time it settled is the
period of time that involves when you were the head of the FHA.
Mr. Montgomery. I would have to go back and read the
settlement, but again, I was not involved in that.
Senator Warren. You can read the settlement. We know when
you were the head of the FHA, and we know that the Wells Fargo
settlement covers the period that you were the head of the FHA.
So I am asking if U.S. Bank was also a client if yours.
Mr. Montgomery. U.S. Bank was, but that had nothing to do
with the False Claims Act.
Senator Warren. Well, I am not asking about False Claims. I
am asking about what happened while you were running the FHA
program because in 2014, U.S. Bank paid $200 million for
defrauding FHA, and in its settlement, it admitted, quote,
``from 2006 to 2001,'' it repeatedly certified of FHA insurance
mortgage loans that did not meet HUD underwriting requirements.
Did your company advise U.S. Bank in conjunction with this
settlement?
Mr. Montgomery. I believe we helped look at loan files, as
I mentioned to you yesterday. The Government asserts material
weaknesses. A lot of what we did was look at loan files, which
they have a right to defend themselves.
Senator Warren. Well, they certainly do have a right to
defend themselves, and somebody built a business defending them
to help them defend themselves.
I would just like to ask. I know I am out of time. I would
like to ask you to provide the Committee with a list of the
clients that your company advised on FHA-related penalties and
settlements during the time that you were heading up the FHA
and the time that you were with this company.
You know, I have seen some amazing cases of spinning
through the revolving door, but this one really might take the
cake. This is someone who has run an agency that puts taxpayer
money on the line, and while there, evidently does not do
enough to stop big banks form submitting fraudulent mortgages,
cost the Government millions and millions of dollars, then
waltzes right out the door and makes money advising those same
banks about how to pay back the Government as little as
possible for the frauds committed on his watch. And now we are
talking about going back and doing it all over again.
Mr. Montgomery may have the best of intentions, but we can
never expect the American people to trust Washington if this
kind of revolving door continues.
So I hope that we will reject this nomination.
Thank you, Mr. Chairman.
Mr. Montgomery. I would like to respond to that, if I
could.
Senator Warren. Please do.
It is the Chairman's time.
Mr. Montgomery. Let me just----
Senator Warren. But if he responds, will I have time to
respond?
Mr. Montgomery. I am prepared to discuss this topic all
day, Senator, if you like.
Senator Warren. So am I.
Mr. Montgomery. Just let me be very, very clear. The
Government assets one thing in the False Claims Act cases that
there is X number of files that, you know, claims were paid on.
They extrapolate that number across the entire book of
business, by the way.
These clients and their law firms asked us to come in there
and said, ``Is what the Government asserting correct?'' Again,
they have a right to defend themselves and to respond.
In many cases, the Government was not wrong, and the
Government knew they were not wrong. In one instance, the
Government said $400 million in damages. We went and did the
loan file reviews, and guess what? It was more like $125
million. Sure, they paid $125 million settlement, but that is a
long way from $400 million.
Again, I just want to be clear. They have a right to say,
``Government, you were not correct in this instance,'' and they
said, ``You are right.'' And that is why they paid a much
smaller settlement.
Chairman Crapo. Senator Warren, you can have the last word,
but please be brief.
Senator Warren. I will be brief because I think somehow we
may be talking past each other.
Mr. Montgomery. I hope we are not.
Senator Warren. My concern is that you were the head of the
FHA. It was your responsibility to see to it that standards
were set so that these banks did not file false claims, and
then as soon as you leave the FHA, you go to a business whose
job it is to make sure that these banks, who have broken the
law, pay as small a penalty as possible. And now you want to
come back to the FHA and run it again. This is the classic
revolving door. In fact, it is worse than the classic. It is
the revolving door at its worst, and the American people cannot
have confidence in our Government so long as the revolving door
is spinning like this. That people work in Government and then
go make a profit off the times they worked in Government, this
just is not right.
Thank you, Mr. Chairman.
Chairman Crapo. Senator Warner.
Mr. Montgomery. I just think we should do what is fair, and
that is all we were trying to do, Senator.
Chairman Crapo. Senator Warner.
Senator Warner. Thank you, Mr. Chairman.
Mr. Montgomery, where have all these--but, Mr. Montgomery,
as somebody who wants to give you a fair shot, I want to make
sure I get all this information as well, so I can----
Mr. Montgomery. Thank you, Senator.
Senator Warner. ----do my own independent review.
I want to start with just making a comment that a number of
us on this Committee on both sides of the aisle have felt for a
long time that one of the last remaining places in terms of a
need for financial reform is housing finance and have spent, as
I have--with my friend, the Senator from Massachusetts, and the
Chairman and the Ranking Member, you know, I know more about
housing finance than I ever wanted to know. But I still do
believe that we are--that the current status of the GSEs being
in conservatorship is not the long-term solution. It is my hope
still that this Committee in a bipartisan way will take on
housing finance reform, that we will do it in a way that allows
competition in the private market and in a way that allows
risk--appropriate risk transfers to those first dollar losses,
and whether that is 4 percent, 6 percent, 8 percent, 10
percent, those are all fair items to debate.
But also that we have a program that has a clearly
identifiable strip or fee that would help support low-income
first-time homebuyers, renters, and others because clearly
access to housing in this country--and I know you all share
this view that it is extraordinarily important.
So again, I am hopeful we are going to make some progress,
and should you be confirmed, Mr. Montgomery, would look forward
to input and trying to work through this issue.
Let me move from some of the subject matter that Senator
Warren was talking about to something that is a bit more
mundane but is an area that I think is in desperate need of
review should you be confirmed, and that is the fact that the
IT systems at FHA--or many of them, I think, are still running
cobalt. It appears to me that the efficiency of FHA is
seriously undermined by the lack of having a modern IT system.
I often point to the fact that if the Federal Government
spends $88 billion on IT, 75 percent of which is mostly just on
patches rather than ever junking some of our legacy systems.
I would like you to talk about where IT reform would fit
should you be confirmed, and unfortunately, because of some of
the rules around FHA funding, it feels to me like we do not
provide FHA with an adequate revenue stream to make the kind of
repairs to their IT system that would bring them into the 21st
century, that would actually then perhaps allow particularly
more low-income and first-time homebuyers be able to access FHA
services.
So if you could speak to that, I would appreciate it.
Mr. Montgomery. Absolutely.
In my previously capacity as Commissioner, I used to joke
that we need to bring FHA technology into the late '90s. I
think that is still the case, by the way, bring it in the late
'90s.
In fairness to the previous Administration, they actually
created a system around what is called Defect Taxonomy and
rolled out the Loan Review System after several years. They
should be commended for that effort, but there is much more
areas where FHA needs help.
CHUMs, which is the backbone I mentioned before, I believe
runs on a Wang mainframe.
The CAIVRS system is antiquated. The ability to properly do
asset management around the single-family inventory is an old
system.
As I referenced before, I had the opportunity to hear some
of things Fannie Mae has done around the Day 1 Certainty
program. Good for them, but my guess, they are probably 25
years ahead of where the FHA is today from a technology
perspective. It is one of the most critical issues.
Senator Warner. Say that--say that last sentence again. You
are saying Fannie Mae is about 25 years behind FHA, or FHA is
behind?
Mr. Montgomery. No, I am guessing Fannie Mae, based on what
I have seen, is 15, 25 years ahead----
Senator Warner. Yes, that is what I thought.
Mr. Montgomery. ----of where the FHA is.
Senator Warner. Right.
Mr. Montgomery. And again, by the way, good. Good for them.
I am glad they are modernizing their technology, but if you
want FHA to be a part of the housing finance system in America,
they need the proper tools.
Senator Warner. And also, when we get into these areas
around--litigation around False Claims Act and trying to make
sure that the Government is protected, I would argue that
outdated old technologies can sometimes lead to some of these
mistakes, and that upgrading that technology could bring more
transparency on both sides. How do you get the funding stream
to do that?
Mr. Montgomery. Well, I just want to respond real quick to
what you said. Absolutely, it can give you more visibility if
it is a data-centric architecture. It would give the Inspector
General more visibility, for example, in a real-time
perspective.
FHA and Ginnie Mae generate billions in receipts that are
currently scored against the HUD's top-line budget. I believe
the last budget is somewhere between $7 and $9 billion. It
would be nice if they could keep some of that for themselves,
FHA and Ginnie Mae, to modernize the systems because they are
critically behind where the GSEs are today. It is----
Senator Warner. Now, would that require----
Mr. Montgomery. ----a completely an unlevel playing field.
Senator Warner. I know I am going--just one last question
on this, but since my colleagues went over, is that--and let me
show my ignorance here. Would that require a legislative
change, or could that be done actually from a commissioner
level?
Mr. Montgomery. Senator, I believe it will require a
legislative change.
Senator Warner. That is what I thought as well. That is
what I thought as well.
But my hope would be, Mr. Chairman and Senator Brown,
that--not sexy, this issue, but when you have got these old
outdated IT systems in an area where, frankly, we can improve
efficiency, we could provide better service to FHA's customers,
there may be another ability to use this data in obviously
privacy-protected ways, that, frankly, there is an enormous,
enormous asset there that we are not taking advantage of. And I
would hope that we could find some commonality on getting the
agency the revenues they need to make the upgrades. They are
way overdue.
Chairman Crapo. Good points.
Senator Warner. Thank you, Mr. Chairman.
Mr. Montgomery. Thank you, Senator.
Chairman Crapo. Thank you, Senator Warner.
And that concludes the questioning. I once again thank our
witnesses for your willingness to serve and for being here
today for this hearing.
I would like to inform you that you will probably receive
additional questions from the Senators. I advise the Senators
that those questions must be submitted by the end of business
on Wednesday, November 1st, and then we would ask our nominees
to respond to those questions by the following Monday, November
6th.
And once again, thank all of you for being here today, and
that concludes our business.
This hearing is adjourned.
[Whereupon, at 11:22 a.m., the hearing was adjourned.]
[Prepared statements, biographical sketches of nominees,
responses to written questions, and additional material
supplied for the record follow:]
PREPARED STATEMENT OF BRIAN D. MONTGOMERY
To Be Assistant Secretary for Housing, Federal Housing Commissioner,
Department of Housing and Urban Development
October 26, 2017
Thank you Chairman Crapo, Ranking Member Brown, and Members of the
Committee, I am honored to appear before you today and to once again be
considered to serve as HUD's Assistant Secretary for Housing and
Federal Housing Commissioner.
I am grateful to President Trump and Secretary Carson for their
confidence in my abilities to serve in such an important position.
If I could, I'd like to take a moment to introduce my wife Katy and
my daughter Emily and son Thomas, and thank them for being here with me
today.
Mr. Chairman, I was humbled by the confidence this Committee placed
in me 12 years ago and sincerely hope I earned your trust while serving
as FHA Commissioner from 2005 to 2009 including 6 months into the Obama
administration.
Some of my Republican friends and colleagues still ask why I agreed
to serve in a Democratic Administration and my answer has always been
the same: ``they asked for my help.'' It was that simple.
Now when I'm asked why I would want to return to HUD, the answer is
just as simple: ``I believe I can make a positive difference.''
Public service is an honor, one I take seriously, and if confirmed,
I will again do my best to further equal access to affordable rental
and home ownership opportunities, and seek solutions to restore
vitality to the housing market.
During my tenure at HUD, I'm proud of the work we did to preserve
FHA as a viable option for homebuyers. Working collaboratively with
this Committee, we were able to pass the Housing and Economic Recovery
Act of 2008, or HERA.
That legislation placed FHA on sounder financial footing by kicking
out the seller-funded downpayment schemes that were hurting borrowers
and decimating the FHA Insurance Fund of more than $15 billion in
losses according to the FHA Actuarial Review contractor.
We were also able to expand home ownership opportunities by giving
borrowers, especially minorities and first-time homebuyers, a safer
option that the subprime loans that were so prevalent at the time.
FHA played no role in the housing boom or collapse, but it was FHA
that stepped in and provided more than $1 trillion in mortgage
liquidity that helped more than 8 million families purchase or retain
their homes between 2008 and 2012.
I'm extremely proud of the effort of the FHA staff who also further
proved the critical role FHA plays during housing downturns.
Putting an exclamation point on FHA's storied role, a well-known
economist said in 2011: ``if FHA lending had not expanded after private
mortgage lending collapsed, the housing market would have cratered,
taking the economy with it.''
Nearly 10 years after the housing collapse, there is still much
more that needs to be done. The home ownership rate today is roughly
the same as it was in 1968, and there is a profound lack of affordable
rental housing in too many communities.
In fact, HUD's latest ``Worst Case Housing Need'' report released
in August 2017 indicated that in 2015 more than 8.3 million lower
income renter households not receiving housing assistance paid more
than half their income in rent.
And while the housing market continues to recover, far too many
credit-worthy borrowers--many of them prospective first-time homebuyers
including minorities and young families--are being left out.
The Urban Institute has estimated that more than 6 million more
mortgages would have been made between 2009 and 2015 if credit
standards had been similar to the reasonable ones in place in 2001,
well before the housing boom.
One reason for the tight credit environment is that lenders remain
hyper-sensitive about defaults and claims out of fear of heavy-handed
enforcement actions. To be clear, fraud and misrepresentation have no
place in any industry much less the one that represents the largest
investment most families will ever make, but I wonder if we haven't
gone too far.
We must do a better job of providing regulatory clarity to mortgage
lenders. It's time we treat them more like business partners than
adversaries.
Another key part of FHA's mission is supporting safe and affordable
rental housing. During my previous tenure as FHA Commissioner, we made
unprecedented changes to leverage private capital with Federal
resources in order to increase the supply of quality rental housing for
people with limited incomes.
I was pleased to see Secretary Donovan and his team continue to
support this important objective and greatly expand it. But, as rental
housing cost burdens grow and worst-case housing needs remain unmet,
clearly there is more work that needs to be done.
I also believe the role of nonprofit housing organizations who are
at the forefront of developing housing solutions could be better
utilized.
Another high priority, if I'm confirmed, will be to address FHA's
outdated IT systems.
While the GSEs have spent millions of dollars upgrading their
technology, FHA is still looking for loose change under the sofa
cushions. That has to end.
FHA and Ginnie Mae generate billions in receipts and I strongly
believe must make investments to fund IT improvements.
Doing so will help reduce the financial risk to taxpayers and
ensure that FHA can operate on a stable platform for years to come.
Finally, I want to give you my pledge that we will do everything we
can to help the people impacted by the hurricanes that ravaged my home
State of Texas, as well as Florida, Puerto Rico, the Virgin Islands,
and the recent wildfires in northern California.
I'm no stranger to disaster recovery, having experienced first-hand
the rebuilding process following Hurricanes Katrina and Rita. I know
the HUD staff continues to work hard to help those displaced or
otherwise impacted by the recent barrage of natural disasters.
I'd like to thank the Committee for your time today, and
consideration of my nomination to serve as FHA Commissioner. I look
forward to your questions.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
PREPARED STATEMENT OF ROBERT HUNTER KURTZ
To Be Assistant Secretary for Public and Indian Housing, Department of
Housing and Urban Development
October 26, 2017
Thank you, Chairman Crapo, Ranking Member Brown, and Members of the
Committee. I am humbled and honored to appear before you today as you
consider my nomination to serve as the Assistant Secretary for Public
and Indian Housing at the U.S. Department of Housing and Urban
Development. I want to extend my sincere thanks and gratitude to
Secretary Carson for recommending me for this position and President
Trump for nominating me.
Joining me today are my wife Abby, my two boys Liam and Henry, my
parents, Bob and Candy, as well as my brother Chase, my sister-in-law
Autumn and their son Harvey. Additionally, I want to thank my friends
from HUD who are here today and watching this hearing, both career and
political employees.
Having served at the Department as a political appointee in the
Bush administration, a career civil servant during the Obama
administration, and now again as an appointee in the Trump
administration, I believe I bring a unique background and diverse
perspective to the position for which I am nominated today.
Additionally, I worked for the City of Detroit, where I interacted with
many of HUD's programs. I am a ``houser'' at heart, a practitioner of
HUD programs and a true believer in the mission of the Department. I
have seen firsthand what we can do with HUD's programs, but I have also
had the opportunity to help craft rules and regulations that I have
then had to implement at the local level. And I can affirm that what I
thought was a good idea in my chair in Washington, made a lot less
sense when sitting in my seat in Detroit.
My time with the City of Detroit, in many ways, was inspirational.
I was blessed to work with an incredible team to help turn around a
housing department considered among the worst performing in the Nation.
In conjunction with the Mayor's office, private sector developers, and
the City's Housing Commission, we developed and produced safe and
affordable housing for the City and its residents. While the
renaissance that is now taking place in the City of Detroit is
something of which I am extremely proud, the real reward for me is
seeing the joy on the faces of individuals that we were able to help.
They will always be a reminder of what we do in public housing and
public service on a day to day basis: we help people.
One of the fundamental lessons I learned in working with the City
was not only the impact of the policies we create at HUD and in
Washington, but that a one-size-fits-all approach to creating more
sustainable, affordable housing does not work. The issues Detroit faces
are different than those faced by Seattle, Boise, and Tribal Lands. We
should give serious thought to allowing Public Housing Authorities more
control of how they manage their portfolios and how to find unique ways
to address their own housing needs. The people who know best are the
local officials managing the local PHAs, and we should provide them
with the tools they need to address their own unique issues. If
confirmed this will be a major goal of mine, and I look forward to
working with you to make it a reality.
The Nation is facing an affordable housing crisis and we cannot
just build our way out of it. Today, only a quarter of those who are
eligible for housing assistance actually receive it. We must find ways
to graduate residents from public housing and put them on a path to
achieving greater economic mobility and self-sufficiency, which allows
us to serve others who need our assistance. This is a priority of
Secretary Carson--one in which I wholly and enthusiastically support.
If confirmed, I look forward to building on the successes of our
current programs while working with the Secretary to implement new and
innovate ways to achieve HUD's mission.
While I have spent some time discussing public housing programs, I
would also like to let the Committee know that, if confirmed, I would
also focus on the Native American programs that are such an integral
part of the work that is done in HUD's Office of Public and Indian
Housing. I had the opportunity to travel to Indian country with
Secretary Carson earlier this year in my current capacity, and
appreciate and understand the needs of our tribal partners. Please know
that I am committed to working with our tribal partners to ensure safe,
decent and affordable housing for these communities.
If confirmed, I look forward to working with the Members of this
Committee to help improve the lives of those Americans who rely on the
programs managed by the Office of Public and Indian Housing.
Thank you again for your consideration of my nomination. I look
forward to your questions.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
PREPARED STATEMENT OF SUZANNE ISRAEL TUFTS
To Be Assistant Secretary for Administration, Department of Housing and
Urban Development
October 26, 2017
Chairman Crapo, Ranking Member Brown, and distinguished Members of
the Committee, it is a great privilege to appear before you this
morning. I am deeply honored that President Trump has nominated me to
serve under Secretary Carson as the Assistant Secretary for
Administration at the Department of Housing and Urban Development.
I would like to introduce my husband of 35 years, Bob Tufts, and
our daughter, Abigail. I also would like to thank my extended family,
friends and former colleagues for their love and support. One does not
receive opportunities like this without years of help from many people,
and that is certainly the case for me.
There are two people who could not be here today, but without whose
courage and life experience I would not be the person I am, nor have
the passion for public service that I do--my late parents, Abraham and
Henriette Israel. Born in Europe, they were living in Antwerp when, on
the morning of May 10, 1940, they awoke to an invasion of enemy planes
overhead forcing them to flee.
For the next 10 years, until they came to the United States, they
were homeless and lived wherever they could find a roof over their
heads; even, one night, sleeping under the pews of a church in France.
As the only child of Holocaust survivors, making a difference and
working in mission-based endeavors has been a guiding force in my life.
However, I have long believed that passion will not produce results
without strong administrative and human resources support. I bring to
bear three categories of skills and experience that I believe will help
HUD improve its operations and services:
1. Experience in turnaround management and leadership development
within mission-based organizations;
2. Experience in the field which makes me sensitive to HUD's
ultimate customers; and,
3. Experience as an outside-the-box, creative thinker, with strong
analytical skills and the ability to both plan and implement
with energy and enthusiasm.
I gained these skills and experiences across many silos, including
practicing law and spending over 20 years in management and consulting.
I served as Regional Director, Region II of ACTION (the current
Corporation for National Service) where I worked with HUD on a variety
of tenant empowerment, literacy, health care and microenterprise
programs and led the Region in improving its service delivery.
I have also served as the President and CEO of the American Women's
Economic Development Corporation where I led the turnaround of this
beloved but beleaguered organization. Our team succeeded in eliminating
the organization's 10-year-old debt while improving its services
including curriculum and online training. We spearheaded a nationally
recognized entrepreneurship training program for women living in the
New York City Housing Authority in which 65 percent of program
participants achieved financial independence and business success.
But I believe AWED's most significant service was rendered after
the 9/11 attacks. Within 72 hours of the attacks AWED provided
emergency personal and business relief services for our students,
faculty and alumni located around Ground Zero, as well as throughout
the City; efforts that earned the organization bipartisan recognition.
My parents were able to make a wonderful life in this country; a
life that started with a stable, affordable home in a safe, secure
neighborhood. I can think of little that would be more meaningful than
to help others find the same path to a better life for themselves and
their families that my parents did. If confirmed, I will work hard to
ensure that HUD's administrative and human resources services are best
directed to fulfill its important mission.
Mr. Chairman, distinguished Members of this Committee, thank you
again for your consideration of my nomination. I welcome your
questions.
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RESPONSES TO WRITTEN QUESTIONS OF SENATOR BROWN
FROM BRIAN D. MONTGOMERY
Q.1. Mr. Montgomery and Mr. Kurtz, the rental assistance
programs you administer affect many families, seniors, and
individuals with disabilities.
If confirmed, will you commit to meeting with assisted
families and organizations that advocate on behalf of HUD
program participants and low-income families?
A.1. Yes, while serving as FHA Commissioner, my staff and I
consistently met with resident advocacy organizations such as
the National Alliance of HUD Tenants, ADAPT, the National Low-
Income Housing Coalition, LeadingAge, National Housing Trust,
National Leased Housing Association, and others to discuss ways
to better address the needs of residents living in apartments
subsidized with Section 8 Project Based Rental Assistance,
Section 202 Supportive Housing for the Elderly, and Section 811
Supportive Housing for Persons with Disabilities, as well as
affordable housing financed with FHA-insured mortgages. I will
continue to do so if confirmed.
Q.2. Do you support dialogue between HUD staff and organized
tenant groups to assist HUD in its oversight of housing
programs?
A.2. Yes, this sort of dialogue is essential in helping HUD
administer its programs. Communication between HUD staff,
leadership, and tenant advocacy groups is key to maximizing
program delivery and efficiency. I always found that dialogue
between the Office of Multifamily Programs Asset Management and
Portfolio Oversight staff and tenant organizations reaped great
insight into issues needing attention and often led the way to
resolution.
Q.3. Mr. Montgomery, from your prospective, who are FHA's
customers? Who is FHA designed to serve?
A.3. FHA's customers are extremely low-, very low-, low- and
moderate-income renters (including seniors and people with
disabilities), low- to moderate-income first-time homebuyers
and homeowners (or those seeking to refinance), FHA-approved
single- and multifamily lenders and servicers, private
apartment owners, and others utilizing FHA subsidies and/or
financing to meet our Nation's housing needs.
Q.4. Mr. Montgomery, if you plan to recuse yourself from
matters involving Collingwood's clients not just the clients
you worked for or the companies for which you served on the
board, will you be able to perform the duties of FHA
Commissioner?
A.4. My ethics agreement with HUD and the Office of Government
Ethics spells out the limited circumstances under which I would
be required to recuse myself. It will not interfere with my
ability to perform the duties of FHA Commissioner.
Q.5. How would you delegate your responsibilities if you were
unable to consider a specific matter?
A.5. In the event I need to recuse myself from a matter, I
would delegate my authority to the General Deputy Assistant
Secretary in the Office of Housing, Ms. Dana Wade.
Q.6. In recent years, many cities have seen a wave of
population growth and investment that have led to greater
economic activity, tighter rental housing markets, and rising
rental housing costs. As a result, many lower-income families
and businesses who endured challenging decades in their
communities are finding themselves priced out of their long-
time neighborhoods just when additional economic opportunities
are opening up. Loss of housing in urban neighborhoods can push
residents away from access to jobs, transit, and local support
networks such as hospitals and child care. In many of these
neighborhoods, federally assisted housing may be coming to the
end of long-term affordability contracts or at risk of loss due
to physical deterioration. HUD estimates that we are losing
10,000 units of public housing every year due to physical
obsolescence. By 2025, nearly 2.2 million units of HUD-assisted
and Low Income Housing Tax Credit-supported housing will reach
the end of their affordability periods. \1\
---------------------------------------------------------------------------
\1\ See ``America's Rental Housing: Expanding Options for Diverse
and Growing Demand, Key Facts'', p. 4, Harvard Joint Center for Housing
Studies, December 9, 2015, available at http://jchs.harvard.edu/
americas-rental-housing.
---------------------------------------------------------------------------
Do you believe that HUD should help preserve housing and
economic opportunities for lower-income families in
neighborhoods experiencing economic growth and rising rental
costs?
A.6. HUD, as part of its mission, should strive to preserve
housing opportunity for individuals and families with limited
incomes. The objective of HUD's Office of Recapitalization and
Assisted Housing Oversight Division is to preserve quality
affordable housing through refinancing and/or rehabilitating
existing affordable housing, and renewing expiring rental
assistance contracts. While serving as FHA Commissioner, I made
significant changes to FHA protocols to actively increase
preservation efforts by better leveraging FHA resources through
increased utilization of low-income housing tax credits
(LIHTCs) and private activity bond financing.
Q.7. If so, what role do you think the programs of the Office
of Housing should play in preserving these opportunities?
A.7. The Office of Housing's role in preserving its portfolio
of 22,000 privately owned multifamily properties and more than
1.4 million assisted rental units is central to HUD's overall
efforts to preserve the affordable housing stock. Working with
private apartment owners and nonprofit organizations,
especially in high-cost areas, to promote the renewal of
expiring Section 8 Project Based Rental Assistance contracts
and facilitating the refinancing of FHA-insured and uninsured
multifamily properties continue to be the most impactful
methods for the Office of Housing to support preservation.
Q.8. Very-low income people with disabilities have great
difficulty in finding and paying for suitable affordable
housing with access to appropriate features and services. Over
1 million very low-income, non-elderly persons with
disabilities pay over half of their incomes for housing, and
approximately 2 million more people--including those with
developmental disabilities--are living in more restrictive,
institutional environments than they would choose or are living
with an aging caregiver. Rent on a modest 1 bedroom apartment
at HUD's estimated national fair market rent would consume all
of the income of a person relying upon Supplemental Security
Income (SSI).
What do you view as the Office of Housing's role in meeting
the housing needs of low-income individuals with disabilities?
A.8. I strongly support the Section 811 program. Section 811
plays a key role providing expanded housing choice for
extremely low-, very low, and low-income renters with
disabilities who cannot find affordable housing. While serving
as FHA Commissioner, I spearheaded program changes to leverage
Section 811 rental assistance funds in housing tax credit and
bond financed transactions to expand the supply of affordable
housing for people with disabilities. This concept materialized
and, currently under this program, State housing finance
agencies that have entered into partnerships with State health
and human services and Medicaid agencies can apply for Section
811 Project Rental Assistance for new or existing affordable
housing developments funded by LIHTC, HOME, or other sources of
funds. It provides stable housing for nearly 30,000 households,
improving their quality of life while also reducing health care
costs. If confirmed, you have my assurance that I will continue
to advocate for this important program.
Q.9. Across America, seniors are struggling to pay for their
housing costs. We know that very low income seniors who pay
more than half of their incomes for housing also spend much
less than their peers on health care, food, transportation and
retirement savings. We also know that affordable housing can be
a tremendous, cost-saving platform for the provision of
services to seniors--services that help seniors remain healthy,
address health challenges, and age in place.
Yet, only one-third of seniors eligible for HUD rental
assistance programs get to use them, resulting in the housing
cost burdens and associated lower spending on health, food, and
transportation. These shut-out seniors also miss out on the
health benefits that come with access to a service coordinator
in their apartment buildings, from living in appropriately
accessible homes that HUD-assisted housing provides, and living
in a community that guards against social isolation.
What is more, as you know, recent studies from both the
Bipartisan Policy Center and Harvard's Joint Center for Housing
Studies have documented a coming wave of housing needs for
America's senior citizens. These needs will include: additional
affordable rental housing, housing and community adaptations
necessary to help seniors age in place; integrating health and
supportive services into housing; and improving technologies
such as telemedicine. To meet these challenges, the Bipartisan
Policy Center has recommended a combination of continued
investment in affordable rental housing, home modification
programs, and coordination between health care and housing
providers to improve health outcomes and lower costs.
If confirmed, what will you do to meet the housing
challenges of an aging America?
A.9. I'm a strong supporter of HUD's work to provide stable
housing for vulnerable seniors and to help them remain safely
in their homes as they age. Affordable and stable housing with
supportive services allows seniors to live independently, but
with a higher level of overall security.
Understanding the need for supportive housing for this
vulnerable population, I will continue to support the
traditional Service Coordinator program. This program provides
for the employment of Service Coordinators in insured and
assisted Multifamily Housing developments that are designed for
seniors and persons with disabilities. Of the 12,000
Multifamily assisted properties, more than 4,000 have service
coordinators that are either project-based or grant funded.
I also support the Administration's request to expand the
Rental Assistance Demonstration to enable the conversion of
Section 202 Project Rental Assistance Contract to long-term
Section 8 Project Based Rental Assistance contracts. This will
provide much-needed recapitalization opportunities to preserve
existing affordable senior housing.
And finally, I have always been a supporter of the Home
Equity Conversion Mortgage (HECM) program, which allows seniors
to age in place by tapping the equity in the home. This is an
important option for seniors that we need to ensure remains
financially viable.
Q.10. Will you take actions to increase the supply of
affordable, accessible rental housing for lower-income seniors?
A.10. Yes, through the increased promotion of FHA's multifamily
mortgage products as credit enhancement on new construction
transactions utilizing housing tax credit and/or bond financing
on senior developments. Most State housing finance agencies
have senior set asides and/or additional points for the new
construction of accessible senior housing with services. FHA
multifamily mortgage insurance products, service coordinator
funding, and rental assistance programs all work well in
facilitating new construction development.
Q.11. Will you take actions to help seniors modify their homes
in order to help them age in place?
A.11. Yes, having a good understanding of the cost associated
with housing one senior in a Section 202 property for 1 year,
the cost efficiency realized through aging in place options is
clear.
Q.12. How would you foster collaboration with health care
providers to meet the needs of America's seniors?
A.12. FHA's health care programs (under Section 232 and 242 of
the National Housing Act) are administered by the Office of
Healthcare Programs. FHA staff collaborate regularly with
health care providers, independent living, nursing home and
assisted living facility owners to discover ways to further
meet the housing and health care needs of America's seniors.
Section 232 mortgage insurance covers assisted living
facilities, skilled nursing facilities, and board and care
homes that provide essential residential care services to
senior citizens. The Section 242 program provides mortgage
insurance to acute-care hospitals that provide critical health
care services to communities nationwide. These important
programs work in partnership with lenders and health care
providers across America to ensure that essential services,
affordability, and access to health care are maintained for
seniors, and also collaborate with other Federal and State
agencies to maximize safety and ensure quality of care.
Additionally, the Section 202 program applicants for
funding often have existing long-term partnerships with State
health and human services and Medicaid agencies to provide a
more comprehensive approach to addressing the housing,
supportive services and health care needs for seniors.
If confirmed, I would continue to support, manage, and
develop the FHA health care portfolio and promote the use of
other existing mortgage insurance programs to expand affordable
senior housing opportunities, affordable health care (facility)
financing, and comprehensive supportive services.
Q.13. Do you support service coordination as a strategy for
improving outcomes for seniors?
A.13. Yes, to reiterate, FHA has several options for financing
senior housing development or rehabilitation, but addressing
supportive service needs, as identified by State and local
agencies, provides a far more comprehensive approach for
success and subsequently a better outcome for seniors.
------
RESPONSES TO WRITTEN QUESTIONS OF SENATOR SHELBY
FROM BRIAN D. MONTGOMERY
Q.1. Mr. Montgomery, I have long been a supporter of a cost
benefit analysis on all regulations because I believe that the
Government must ensure that the cost of implementing a
regulation does not outweigh its intended benefits. Can you
commit to ensuring that a cost-benefit analysis will be
conducted on regulations that are considered under the FHA?
A.1. I very much share your view that new regulations need to
undergo a vigorous cost-benefit analysis. The President has
made this a priority as well and I want to assure you that, if
I'm confirmed, we will conduct a cost-benefit analysis on new
regulations.
Q.2. Mr. Montgomery, will you ensure that the intended impact
of FHA rules are consistent with the spirit and purpose of
their underlying statute, and that they do not intrude into
appropriate State regulation or law?
A.2. Yes, I think that is very important. We want to make sure
FHA is complying with the law as well as congressional intent,
and we need to have a healthy respect for its impact on States.
------
RESPONSES TO WRITTEN QUESTIONS OF SENATOR SCOTT
FROM BRIAN D. MONTGOMERY
Q.1. There's no doubt that the FHA's mission of promoting home
ownership is an important one. That said, I am mindful that
it's taxpayers who were forced to bailout the FHA with $1.7
billion when it dipped in the red during 2013.
On the other hand, private mortgage insurers cover roughly
36 percent of the market, which is behind the FHA's share, and
don't need taxpayers to cover their losses.
Fannie and Freddie are currently offloading their risk to
reinsurance markets and mortgage insurers. If expanded, these
initiatives will prevent future taxpayer bailouts.
Please answer the following with specificity:
Would you implement a similar program at FHA?
A.1. I would certainly be open to exploring greater risk
sharing within the FHA program. However, it's important to keep
in mind that many borrowers served by FHA would not be served,
or would be served at much higher cost, by private capital. FHA
would have to carefully assess if private sector pricing for
FHA credit risk would truly strengthen the financial condition
of the Mutual Mortgage Insurance Fund--and whether or not FHA's
outdated technology can effectively operate such a program.
Q.2. Can you do it alone or must Congress act?
A.2. My understanding is FHA has certain statutory authority
for off-loading risk. These authorities would need further
legal review to understand exactly what kind of program and
what size could be entertained without additional authorities.
Furthermore, because the GSEs and FHA operate different
business models, any risk sharing initiative must be carefully
reviewed to make sure it works for FHA.
Q.3. Do you favor a more precise statutory definition of FHA's
mission?
A.3. As Congress considers the future of the housing finance
system in the context of reform, consideration of the proper
role and mission of FHA within the system is necessary,
including the vital role FHA plays with State and local Housing
Finance Authorities. The mission of FHA should be aligned to
the role Congress wishes it to play going forward.
Q.4. Manufactured housing is an affordable housing option for
more than 22 million working families.
It's particularly important in my State, where 20.3 percent
of all homes are prefabricated.
Please answer the following with specificity:
What's your view on HUD's regulations governing
manufactured housing?
Does the current framework ensure affordability and access?
A.4. Manufactured housing is an incredibly important source of
housing for millions of Americans and the only form of non-
subsidized housing HUD directly regulates. The President's
Executive Order #13777 charged all Federal agencies with re-
examining their rules and reducing the regulatory burden on the
American public. We need to make sure FHA's manufactured
housing rules undergo a rigorous cost-benefit analysis to
ensure we are balancing important product safety considerations
with affordability and access. If confirmed, you have my
commitment this will be a priority.
------
RESPONSES TO WRITTEN QUESTIONS OF SENATOR PERDUE
FROM BRIAN D. MONTGOMERY
Q.1. During your previous tenure as FHA commissioner, you
chaired the Mortgagee Review Board. Can you describe the
administrative actions you took against FHA lenders that failed
to comply with program requirements?
A.1. During my prior tenure as FHA commissioner, during which I
chaired the Mortgagee Review Board, we took aggressive action
against FHA lenders that committed fraud or otherwise failed to
comply with important program requirements. As I stated during
my confirmation hearing, there is simply no place for fraud
within FHA. After all, we are talking about the single biggest
investment most Americans will make during their lives, and
there are important taxpayer protections to consider as well.
In total, we brought cases against 38 lenders in 2005 (some
of which were prior to my confirmation), 21 in 2006, 18 in
2007, 95 in 2008, and 593 in 2009. (It's important to note that
the spike during those last 2 years was a direct result of a
determination by HUD's Administrative Law Judge that lenders
who do not comply with annual recertification requirements must
have a decision rendered by the MRB, rather than by a decision
of the Lender Activities Office Director via a delegation of
authority from the Board.)
Of note, in 2006, we settled an estimated $41 million case
with AMRO for possible violations of the False Claims Act,
Program Fraud Civil Remedies Act, and HUD mortgage lending
requirements. The Government found that during the period
January 2000 to April 2003, two of AMRO's underwriters
authorized AMRO's employees to sign the underwriters' names to
the Addendum to the Uniform Residential Loan Application. The
application contains language that certifies the underwriters
reviewed and underwrote loans that the underwriters did not
personally review or underwrite. On December 30, 2005, HUD
executed a settlement agreement with AMRO where the lender
agreed to pay the U.S. Government $16.85 million for making
false certifications to HUD on 28,097 FHA-insured loans. AMRO
also agreed to not submit insurance claims on 783 defaulted
loans, for an additional estimated savings to the Government of
$24.35 million.
------
RESPONSES TO WRITTEN QUESTIONS OF SENATOR KENNEDY
FROM BRIAN D. MONTGOMERY
Q.1. Mr. Montgomery, in January 2015, HUD reduced premiums and
caused FHA to absorb many borrowers that could have been
otherwise served by the private sector, increasing the market
share for Government-backed lending.
Is it your belief that the FHA should be implementing
arbitrary premium reductions to gain market share and increase
American taxpayers' exposure to mortgage credit risk?
A.1. FHA premiums should never be set arbitrarily. During my
prior tenure as FHA Commissioner, we worked closely with OMB to
set mortgage insurance premiums in an actuarily sound manner--
at levels that carefully balanced FHA's dual responsibility of
promoting home ownership for first-time and low-and moderate-
income borrowers while also protecting the Mutual Insurance
Fund and ultimately the taxpayers who stand behind it. If I am
confirmed to lead FHA again, I certainly would want to take a
fresh look at mortgage insurance premiums. I know FHA will be
releasing its annual actuarial report later this month and I
think that will help inform any future decision on premiums.
Q.2. Mr. Montgomery, analysis \1\ from the American Enterprise
Institute (AEI) shows that almost half of the buyers that
benefited from FHA's January 2015 premium reduction were
poached from other markets, such as the GSEs, which have some
amounts of private capital standing in a first loss position.
Another third of the 180,000 buyers would have entered the
markets regardless of the lower premiums because of an
improving economy. Numerous high-level HUD officials from
previous Administrations, including former FHA Commissioner
Carol Galante, have supported the notion that private capital
should play a leading role in insuring low downpayment loans.
---------------------------------------------------------------------------
\1\ American Enterprise Institute (AEI) International Center on
Housing Risk, ``The 2015 Cut in FHA's Mortgage Insurance Premium: Did
It Work as Intended?'' December 27, 2016. Available at: https://
www.housingrisk.org/wp-content/uploads/2017/09/FHA-Premium-Cut-
Briefing-FINAL.pdf.
---------------------------------------------------------------------------
What is your vision for how FHA can complement, but not
crowd out private capital in the mortgage insurance market?
A.2. Private capital should always play the leading role in a
vibrant housing finance system and we are continuing to see
private capital return, albeit slowly. While there will
naturally be some overlap between the types of borrowers served
by FHA and those served largely through private capital, I've
never viewed them as being in direct competition. The key, as I
noted in my above answer, is to set premiums and other policies
in a way that allows FHA fulfill its mission while minimizing
any encroachment into segments of the market that are best
served by private capital.
Mr. Montgomery, the fiscal year 2016 annual report for the
Mutual Mortgage Insurance Fund (MMIF) was the first actuarial
report in nearly a decade to show that the FHA's single-family
program complied with the 2 percent statutory minimum capital
requirement. Despite being below the statutory minimum for
close to a decade and receiving a $1.7 billion taxpayer bailout
in 2013, FHA suffered no consequences and, in fact, continued
to expand its footprint in the housing market.
Q.3. Do you think that, as it would be for any other financial
institution, that there should be ramifications for when FHA
fails to meet this minimum capital requirement?
A.3. It is vitally important that FHA maintain its capital
ratio above the congressionally mandated level of 2 percent and
that failure to meet that level be subject to strong
congressional oversight. Further ramifications should be
considered carefully, especially if they limit FHA's ability to
provide liquidity and maintain the Nation's housing market
during times of significant economic stress.
Q.4. Do you agree that it is time to make FHA more financially
resilient by increasing its capital requirements to be more in
line with its private market counterparts?
A.4. Congress may well wish to consider higher capital
requirements for FHA as it explores broader housing finance
reform. I urge that any such consideration carefully balance
the ability of FHA to fulfill its mission to provide affordable
mortgage finance with protecting taxpayers. A countercyclical
framework that builds capital in good times to cushion the fund
in times of stress also merits consideration.
------
RESPONSES TO WRITTEN QUESTIONS OF
SENATOR MENENDEZ FROM BRIAN D. MONTGOMERY
Q.1. In January, you said ``[e]xcessive enforcement actions,
coupled with State and Federal regulatory reforms, have
discouraged mortgage lenders from making any loans that fall
outside of the strict boundaries set by CFPB regulations.''
Please explain what you meant.
A.1. There's no doubt in my mind that new rules were necessary
to prevent the type of lending that led to the financial
crisis. I just wonder if maybe we haven't gone too far in the
opposite direction. The Urban Institute calculated that 5.2
million more loans would have been made between 2009 and 2014
if we were using the reasonable underwriting standards in place
back in 2001. In her paper, Laurie Goodman wrote ``The factors
contributing to the tight credit box are complex, ranging from
the issue of lender overlays due to repurchase risk, to the
high costs of servicing delinquent loans, to fears of
litigation by the Department of Justice, the HUD Inspector
General, or State Attorneys General.'' That's all I meant by
the quote you referenced.
Q.2. In your opinion, what role should the Federal Housing
Administration play in identifying and investigating cases in
which lenders submit false claims for FHA mortgage insurance?
A.2. When I chaired the Mortgagee Review Board as FHA
Commissioner, we took aggressive action against FHA lenders
that committed fraud or otherwise failed to comply with
important program requirements. As I stated during my
confirmation hearing, there is simply no place for fraud within
FHA. After all, we are talking about the single biggest
investment most Americans will make in their lives, and there
are important taxpayer protections to consider as well.
In total, we brought cases against 38 lenders in 2005 (some
of which were prior to my confirmation), 21 in 2006, 18 in
2007, 95 in 2008, and 593 in 2009. (It's important to note that
the spike during those last 2 years was a direct result of a
determination by HUD's Administrative Law Judge that lenders
who do not comply with annual recertification requirements must
have a decision rendered by the MRB, rather than by a decision
of the Lender Activities Office Director via a delegation of
authority from the Board.)
Of note, in 2006, the FHA settled an estimated $41 million
case with AMRO for possible violations of the False Claims Act,
Program Fraud Civil Remedies Act, and HUD mortgage lending
requirements. The Government found that during the period
January 2000 to April 2003, two of AMRO's underwriters
authorized AMRO's employees to sign the underwriters' names to
the Addendum to the Uniform Residential Loan Application. The
application contains language that certifies the underwriters
reviewed and underwrote loans that the underwriters did not
personally review or underwrite. On December 30, 2005, HUD
executed a settlement agreement with AMRO where the lender
agreed to pay the U.S. Government $16.85 million for making
false certifications to HUD on 28,097 FHA-insured loans. AMRO
also agreed to not submit insurance claims on 783 defaulted
loans, for an additional estimated savings to the Government of
$24.35 million.
From the January 2006 HUD News Release: Brian Montgomery,
HUD's Assistant Secretary for Housing-Federal Housing
Commissioner said, ``As much as we intend to aggressively
expand the FHA program to help even more families realize their
American Dream and become homeowners, we will not do so at the
expense of the financial soundness, integrity or reputation of
the Federal Housing Administration. This settlement is evidence
that we will take immediate action if our participating
lenders, however large or small, fail to follow our
underwriting requirements.''
Q.3. During your nomination hearing, in response to a question
from Senator Corker, you said ``I am not saying you should look
the other way when there is fraud or misrepresentation, but I
hope we have a serious discussion about whether or not the
False Claims Act is the right tool going forward.'' Please
explain what you meant by this comment.
A.3. What I was referring to in my response to Senator Corker
was the important work currently underway at FHA to finalize
what is known as Defect Taxonomy. This is an area I want to
focus on if confirmed because I believe if FHA is able to
provide FHA-approved lenders with clearer ``rules of the road''
for what constitutes a material violation of program
requirements, they will hopefully be able to originate better,
safer mortgages. I'd like to see us focus more on protecting
borrowers on the front end instead of waiting until they are
harmed and turning to the False Claims Act to extract
penalties.
Q.4. If confirmed as FHA Commissioner, please outline any steps
you would take with regard to the HUD's role in enforcement
actions under the False Claims Act.
A.4. My understanding is that HUD and Justice Department staff
have already been discussing the use of the False Claims Act
going forward and whether a 150-year-old statute is the proper
enforcement tool. An FHA representative should be an active
participant in these discussions.
Q.5. During your nomination hearing, in response to a question
from Senator Corker, you raised the question of whether FHA
insurance should be restricted to first-time homebuyers. Of the
number of FHA endorsements in fiscal year 2016, 30 percent were
refinances that helped borrowers reduce their housing costs and
approximately 18 percent of purchase loans were for non-first-
time homebuyers. Do you support restricting FHA endorsements to
first-time homebuyers?
A.5. I do not. In fact, I think restricting FHA lending to
first-time homebuyers would greatly limit FHA's ability to help
lower-income borrowers purchase or refinance a home. In my
response to Senator Corker, I was simply listing some of the
recommendations that were recently put forward in a CBO study
that offered options for managing FHA's risk. I was by no means
endorsing this particular policy.
Q.6. If confirmed, do you plan to revisit the current
Administration's decision to reverse the annual mortgage
insurance premium reduction announced by the previous
Administration?
A.6. If confirmed, I certainly would want to take a fresh look
at mortgage insurance premiums but speaking from experience it
is a lengthy process that also involves OMB. I know FHA will be
releasing its annual actuarial report later this month and I
think that will help inform any future decision on premiums.
Q.7. As a result of the Office of Multifamily Housing's
Multifamily for Tomorrow Transformation, nearly all of the
multifamily asset management positions located in Newark, New
Jersey have been relocated to New York. As a result, I have
heard repeated complaints by owners in New Jersey since the
consolidation began. Will you commit to retaining a sufficient
number of multifamily asset managers in the HUD Newark office
to properly serve the owners and residents of federally
assisted housing in my home State of New Jersey?
A.7. I'm certainly sensitive to your concerns given the sheer
volume of multifamily housing in the State of New Jersey. I
have heard differing reports from the field--both that the
Multifamily Transformation has achieved positive results, but
also that it's been disruptive in some parts of the country. If
confirmed, I'd like to take a closer look at how we can be
better meeting New Jersey's needs.
Q.8. Do you support initiatives that pair housing counseling
with a mortgage insurance premium incentives, including but not
limited to the Federal Housing Administration's Homeowners
Armed with Knowledge Program?
A.8. See below.
Q.9. If confirmed as FHA Commissioner, what ideas or
initiatives would you pursue to expand access to housing
counseling?
A.9. I think housing counseling is absolutely critical. During
my prior tenure as FHA Commissioner, I sat through a counseling
session and was able to see the value first hand. I also served
on the board of NeighborWorks America during my entire tenure.
If confirmed, I'd like to take a fresh look at ways we can
incentivize housing counseling as a tool to provide homeowners
and potential borrowers with information to (1) make
independent financial decisions and (2) maximize the level of
success of FHA borrowers.
Q.10. In New Jersey, 70 percent of extremely low-income senior
households pay more than half of their income for housing.
Nationally, only one in every three seniors eligible for HUD
rental assistance programs get to use them, resulting in severe
housing cost burdens and associated with limited spending
ability on other necessities. With baby boomers retiring, the
number of senior renters is projected to soar between now and
2035, as will the number of cost-burdened seniors.
What specific policy steps do you plan to take to expand
opportunities that provide affordable, sustainable, and
dignified housing that will allow our Nation's low-income
elderly to maintain independence and age in place?
A.10. I'm a strong supporter of HUD's work to provide stable
housing for vulnerable seniors and to help them to remain
safely in their homes as they age. Stable housing provides
financial security, physical security, social connections, and
enables delivery of long-term community based supportive
services. I also recognize that to support vulnerable
residents, housing providers must possess the skills and
resources to enable residents to remain safely in their home,
regardless of cognitive impairment, limited mobility, or loss
of functionality.
Understanding the need for supportive housing for this
vulnerable population, I will continue to support the
traditional Service Coordinator program. This program provides
for the employment of Service Coordinators in insured and
assisted Multifamily Housing developments that are designed for
the elderly and persons with disabilities. Of the 12,000
Multifamily assisted properties, a little over 4,000 have a
service coordinator that is either project-based or grant-
funded.
I also support the Administration's request to expand the
Rental Assistance Demonstration to enable conversation of
Section 202 Project Rental Assistance Contract to long-term
Section 8 assistance. This will provide much-needed
recapitalization opportunities to preserve existing affordable
senior housing.
And finally, I have always been a supporter of the Home
Equity Conversion Mortgage (HECM) program, which allows seniors
to age in place by tapping the equity in the home. This is an
important option for seniors so we need to ensure it remains
financially viable.
Q.11. Will you commit to fighting attempts by the
Administration to make cuts to the Section 202 program?
A.11. I am a strong supporter of HUD's role in providing stable
housing to seniors. The Section 202 program is a central part
of these efforts, having created nearly 400,000 homes for low-
income seniors. Section 202 Project Rental Assistance Contracts
also provide essential service coordination resources to help
seniors remain in their homes as they age. If confirmed, you
have my assurance that I will continue to advocate for this
important program.
Q.12. In 2010, Congress passed the Frank Melville Supportive
Housing Investment Act to reform and modernize the HUD Section
811 program, bipartisan legislation I was proud to author. The
Section 811 Project-Based Rental Assistance program has been
enormously successfully in helping States agencies develop
integrated permanent supportive housing targeted to people with
disabilities who would otherwise be living in high-cost
institutional settings or worse, be homeless. Prior to passage
of the bill, the per-unit cost of the program was $150,000. By
contrast, the per-unit cost of the program now averages
$30,000.
What will you do to build on this record of success for the
Section 811 project-based rental assistance program?
A.12. I very much appreciate your commitment to this program as
well as the legislation you authored. The Section 811 Project
Rental Assistance Demonstration is a promising new initiative
to deliver integrated housing opportunities for people with
disabilities. The lessons learned and the partnerships formed
between State housing agencies, State health and human services
agencies, and State Medicaid agencies, will pave the way for
future efforts to provide integrated housing solutions,
improving quality of life for residents at reduced cost to
taxpayers. I'm looking forward to seeing the results of the
``PRA Demo'' so that we can develop further proposals to
support integrated supportive housing and to foster effective
State-level partnerships.
Q.13. How do you plan to support the develop of permanent
supportive housing units so that adults with disabilities can
live amongst the community as opposed to in costly and isolated
institutional settings?
A.13. See above.
Q.14. What strategies do you plan to undertake to address the
challenge of assisting States to meet this enormous demand for
affordable rental housing for non-elderly people with
disabilities?
A.14. See above.
Q.15. Will you commit to fighting attempts by the
Administration to make cuts to the Section 811 program?
A.15. I strongly support the Section 811 program. Section 811
plays a key role assisting low-income renters with disabilities
who cannot find affordable housing. Section 811 provides stable
housing for nearly 30,000 households, improving their quality
of life while also reducing health care costs. If confirmed,
you have my assurance that I will continue to advocate for this
important program.
Q.16. The President's budget request includes a general
provision increasing tenant rent contributions from 30 percent
to 35 percent of income. According to the Department's own
estimates, for households living in units receiving subsidies
through the section 8 project-based rental assistance program,
this proposal would result in a nearly 22 percent tenant rent
increase in the first year, and a 31 percent rent increase in
subsequent years. In addition, the Department calculated that a
staggering 64 percent of the population impacted by the
proposed rent increases are elderly or disabled.
Do you believe that tenant rent increases of 22 percent and
31 percent are significant?
A.16. See below.
Q.17. In your opinion, how will the impacted elderly and
disabled households--the vast majority of whom live on fixed
incomes--be able to afford a 22 percent and ultimately 31
percent rent increase?
A.17. See below.
Q.18. Do you believe that a 22 percent rent increase, and
ultimately a 31 percent rent increase, on the Nation's lowest-
income families, elderly, and persons with disabilities will
increase housing instability? If not, please explain.
A.18. The proposed increases in tenant contributions, averaging
less than $90 per month for households affected by the proposed
change in the income calculation, still leaves most households
with a monthly subsidy in excess of $500 relative to market
rents. In addition, hardship exemptions will be available to
assist households facing difficult situations.
My understanding is the FY2018 budget proposals were a
first step toward a holistic rental reform package for 2019. If
I'm confirmed, I look forward to participating in the
development of that legislative proposal and will work with
Congress to ensure we are able to provide efficient and
effective support to the most vulnerable families.
Q.19. In my home State of New Jersey, New Jersey Community
Capital (NJCC)--a nationally recognized Community Development
Financial Institution--has been tremendously successful with
the loans it has purchased through FHA's Distressed Asset
Stabilization Program (DASP), which allows FHA to sell
defaulted mortgages to investors. NJCC is able to make
modifications to reduce loan balances and lower monthly
payments for homeowners that are behind on their mortgages,
allowing them to avoid foreclosure and stay in their homes. And
where modifications are not possible, NJCC has turned
foreclosed homes into affordable rental housing or new
affordable ownership opportunities.
Will you commit to making improvements to DASP that allow
community-oriented groups like New Jersey Community Capital to
purchase more loans and therefore achieve better outcomes for
more homeowners and communities?
A.19. I know the DASP program has set aside pools for
community-oriented organizations like NJCC. If confirmed, I
want to see if we can find additional opportunities for groups
like this to participate in the DASP program. This will be a
priority for me.
Q.20. Will you commit to strengthening the program's loss
mitigation, vacant property, and neighborhood stabilization
standards so that we can ensure homeowners and neighborhoods
are the beneficiaries of this program--not private equity firms
and hedge funds?
A.20. My understanding is that HUD strengthened DASP's loss
mitigation requirements, vacant property/neighborhood
stabilization requirements, and enhanced nonprofit
participation in 2016. If confirmed, I want to continue to
evaluate and strengthen the program to ensure fair treatment of
borrowers and encourage participation by nonprofit partners.
------
RESPONSES TO WRITTEN QUESTIONS OF
SENATOR DONNELLY FROM BRIAN D. MONTGOMERY
Q.1. On November 1, FHA intends to implement a new program
called E-Tool, which has been developed by the HUD Office of
Multifamily Housing. My understanding is there are lingering
concerns about the readiness of the tool and whether computer
programming issues still exist.
Mr. Montgomery, what is the status of E-tool and do you
believe it is ready for implementation? What steps can HUD take
to ensure a smooth and glitch-free roll-out?
A.1. As you noted, it's my understanding that FHA rolled out
its E-Tool on November 1 and multifamily lenders are now using
it to submit all new applications. As a strong proponent of
updating FHA's antiquated technology, I applaud the effort to
improve the application process for FHA lenders. If confirmed,
will ask for an update on the E-Tool during my first week.
------
RESPONSES TO WRITTEN QUESTIONS OF SENATOR SCHATZ
FROM BRIAN D. MONTGOMERY
Q.1. Over its history, FHA has been an essential tool for the
construction and permanent financing and refinancing of
apartments. While less than 10 percent of the outstanding
multifamily mortgage debt, the role it serves as a source of
capital for underserved segments of the rental market cannot be
overstated.
Why are FHA's multifamily programs such a valuable source
of capital?
A.1. Over time FHA has proven an important resource to
stabilizing the market by playing a countercyclical role during
financial downturns when capital markets tighten, as it did
again through the financial crisis beginning in 2008. FHA's
conservative approach, namely its long-term, fixed-interest
rate, and fully amortizing debt, has proven a dependable source
of capital for borrowers, lenders, and investors, especially in
periods of capital tightening, and especially in otherwise
underserved markets.
Q.2. FHA's multifamily programs largely performed well
throughout the 2008 housing crisis and continue to do so today.
Given these circumstances, do you support a robust FHA
multifamily program? What changes can be made to encourage more
multifamily construction to meet the housing shortage this
country faces?
A.2. I support a robust FHA multifamily program so that it can
continue to finance the construction and preservation of
affordable housing, and so that it can continue to play its
critical, historic role of providing countercyclical capital to
the market. If confirmed, I believe program changes can be made
to encourage greater use of FHA financing for multifamily
construction, including better aligning programs with the use
of Low Income Housing Tax Credits. Pursuing this robust mission
must always be balanced with risk mitigation to protect FHA
from losses.
Q.3. During the last Administration, HUD's Office of
Multifamily Programs underwent a significant restructuring with
the goal of improving transactional and operational efficiency.
What is the status of the transformation? Do you think the
effort was successful? Are there any changes you plan to
implement going forward?
A.3. The Multifamily Transformation has been completed across
the country. It's something I want to be briefed on, if I'm
confirmed. From what I've heard, the results have been mostly
positive, but I've also heard of growing pains in some parts of
the country and I want to make sure we are sensitive to those
concerns and that they are addressed. Clearly there is more
work that needs to be done, but overall it seems the results
have been positive.
------
RESPONSES TO WRITTEN QUESTIONS OF
SENATOR CORTEZ MASTO FROM BRIAN D. MONTGOMERY
Q.1. Last week, Secretary Carson vowed to reduce penalties
against lenders for failing to originate loans according to
Federal Housing Administration (FHA) standards. \1\ And in the
past, in your role as a bank consultant, you have said that,
``[t]he overreach of the False Claims Act by the Department of
Justice has driven FHA's top producing lenders out of the
Nation's flagship home buying program.''
---------------------------------------------------------------------------
\1\ Joe Light, ``Ben Carson Vows To Pull Back on Mortgage
Penalties at HUD'', Bloomberg. October 23, 2017. Available at: https://
www.bloomberg.com/news/articles/2017-10-23/hud-secretary-carson-vows-
to-pull-back-on-mortgage-penalties.
---------------------------------------------------------------------------
When you went into the private sector, you advocated for a
light-touch approach on banks for failing to meet FHA
standards. But back in 2006, when you were FHA Commissioner,
you said, ``as much as we intend to aggressively expand the FHA
program--we will not do so at the expense of the financial
soundness, integrity or reputation of the FHA.'' \2\ You went
on to announce a False Claims Act settlement with one
misbehaving lender, saying, ``we will take immediate action if
our participating lenders, however large or small, fail to
follow our underwriting requirements.''
---------------------------------------------------------------------------
\2\ https://archives.hud.gov/news/2006/pr06-002.cfm
---------------------------------------------------------------------------
Given that you've changed your mind on this issue, what
assurances can you provide that you'll advocate for the
interests of taxpayers if confirmed to FHA, and not your past--
and potentially future--bank clients?
A blog published by your firm called the new mortgage rules
following the financial crisis a ``regulatory jihad.'' \3\
These rules included a ban on dual-tracking homeowners,
requirements to offer borrowers regular and clear monthly
statements, and implementation of a fair review process for
homeowners applying loan modifications. Do you think that this
statement was fair?
---------------------------------------------------------------------------
\3\ Ben Lane, ``Collingwood Group Chairman Calls Out `Regulatory
Jihad' on Mortgage Lenders'', HousingWire. April 8, 2016. Available at:
https://www.housingwire.com/articles/36743-collingwood-group-chairman-
calls-out-regulatory-jihad-on-mortgage-lenders.
---------------------------------------------------------------------------
During your answers to questions at your confirmation
hearing, you said that the Department of Justice pursued False
Claims Act cases on the basis of ``clerical errors.'' Can you
provide examples of the types of clerical errors that spurred
such cases? To your knowledge, were any False Claims Act cases
pursued solely on the basis of clerical errors?
A.1. I want to be very clear that I have not changed my mind on
the critical importance of strong enforcement. I aggressively
pursued cases against FHA lenders that perpetrated fraud or
otherwise violated program guidelines during my tenure as FHA
Commissioner, and if confirmed, will prioritize enforcement
again. You rightly noted this is in the best interests of
taxpayers, but it's also in the best interest of FHA borrowers,
for most of whom a home will be the single largest investment
they will make in their lives. Put simply, there's no room for
fraud or misrepresentation in FHA.
During my time in the private sector, I never advocated for
a ``light-touch approach.'' Rather, our firm assisted clients
when matters were brought to their attention usually by FHA
staff. We later were asked to assist law firms assisting our
clients when the False Claim Act was used against them. Our
team of former FHA staff would review the loan file documents
and determine based on our experience whether or not the errors
the Government asserted were material in nature actually were
material. In our experience, many times they were not material
errors. For example, an error we frequently found in our review
of loan files identified by the Department of Justice included
miscalculating income. However, when we re-calculated the
correct income, the loan still met FHA guidelines for debt-to-
income ratios. The finding was not material (especially in
cases where the borrowers had been current for several years),
but the Department of Justice would contend it was material
because the initial calculation was wrong.
We saw many cases in which the False Claims Act was used to
hold a lender responsible for what were truly immaterial
errors. You're absolutely correct that there were material
errors as well. I don't think any case was ever brought solely
on the basis of immaterial and administrative errors, but we
saw numerous instances where minor errors were included in
order to bolster a case and achieve a larger settlement. I
thought that was the wrong way to go after lenders and
ultimately it chased many of them out of the FHA program
leaving borrowers with fewer choices--in particular, the large
banks who exited the FHA program after decades of
participation.
Finally, with respect to the Nation's largest depository
banks, it's worth noting they have all now settled their False
Claims Act cases.
With respect to the blog you brought to my attention, I
want to make very clear this phrase was NOT made by me but
rather a work colleague who certainly is entitled to his own
opinion. That said, I would not have chosen those words.
Q.2. Back in May, I wrote a letter with Senator Rubio to
Secretary Carson, inquiring about a particular provision buried
in the HUD budget that would seemingly diminish protections for
surviving spouses with HUD-insured reverse mortgages following
the death of their spouse.
I appreciate that the Department responded to our letter,
and emphasized that it was not your intention to reduce
protections against eviction currently afforded to seniors. But
I still haven't been fully satisfied as to what the impact of
this provision would be, if implemented. Some legal services
attorneys my office has contacted in Nevada remain concerned.
They believe that the language could give the Secretary more
discretion not to transfer loans to surviving spouses upon the
death of their partner.
Can you commit to me that there will be absolutely no
diminution in the protections afforded to surviving spouses in
the reverse mortgage program under your watch?
A.2. During my briefings prior to my confirmation hearing, HUD
staff informed me that the Department recently implemented new
regulations formally codifying its commitment to protections
for eligible non-borrowing HECM spouses. I share your view that
we need to maintain protections for non-borrowing spouses and,
if confirmed, want to work with you further on this issue.
Q.3. Currently, it is not mandatory for servicers to provide
loss mitigation to FHA reverse mortgage borrowers when they
fall behind on property taxes and insurance. Will you commit to
making this loss mitigation mandatory?
A.3. I know FHA is committed to making loss mitigation options
available to HECM servicers for borrowers who have fallen
behind on their property taxes and insurance, but you are
correct that these loss mitigation options are not mandatory.
If confirmed, I would like to examine this issue more closely
to fully understand how the requirement of loss mitigation for
HECM borrowers might have financial implications to the MMI
Fund.
Q.4. Mr. Montgomery, you currently serve on the board of a
private mortgage insurance company that stands to profit based
on certain decisions you may make at FHA. While you will have
to abide by Government recusal policies, of course this creates
the appearance of a conflict of interest in your job, if
confirmed.
For the benefit of public transparency, do you intend to
return to the board of a mortgage insurance company upon the
expiration of your term at FHA?
A.4. While I intend to return to the workforce in some capacity
following my term as FHA Commissioner, if I'm confirmed, as far
as I can foresee I have no plans and have made no arrangements
to return to the board of a mortgage insurance company.
Further, I believe my previous tenure as FHA Commissioner and
later serving on the board of a private mortgage insurer
provides me a unique and insightful view into the distinct
roles each play in the mortgage marketplace.
------
RESPONSES TO WRITTEN QUESTIONS OF SENATOR BROWN
FROM ROBERT HUNTER KURTZ
Q.1. In July of 2016, Congress enacted the Housing Opportunity
Through Modernization Act (HOTMA). This legislation was widely
supported across the spectrum of housing groups. It would
streamline programs and help communities create new housing
opportunities for vulnerable populations. Yet HUD has not fully
implemented this legislation.
Can you tell me whether you will make HOTMA implementation
a priority, if you are confirmed?
A.1. If confirmed, I will make the implementation of HOTMA a
priority for the Office of Public and Indian Housing (PIH).
During Secretary Carson's testimony in the House Financial
Services Committee, he indicated that around 75 percent of
necessary actions have been completed or are currently
underway. However, there is still more work to be done and, if
confirmed, I will commit to implementing the remaining HOTMA
provisions and providing PHAs with clear guidance that will
assist them in making changes to their program operations.
Q.2. In your testimony, you say that you want to ``find ways to
graduate residents from public housing and put them on a path
to achieving greater economic mobility and self-sufficiency.''
Evicting someone from public housing would arguably put an
individual ``on a path to achieving greater economic mobility
and self-sufficiency.'' Someone could argue that a person who
is homeless is self-sufficient and economically mobile.
Since I am sure that is not what you had in mind, please
describe how you would define these terms.
Please describe some of the ways that you have in mind of
improving the lives of current residents so they may secure
decent, safe, and affordable private housing.
How will you measure the progress and success of your
efforts?
A.2. As a career houser, I would certainly disagree with anyone
who believes that evictions are part of HUD's mission and that
homelessness equates to that person being ``self-sufficient and
economically mobile.'' If confirmed, I will advocate for a
holistic approach to assisted housing for families that extends
beyond the brick and mortar and focuses on providing
opportunities for families to achieve self-sufficiency. In
support of this effort, HUD has two programs in particular that
are administered by Public and Indian Housing that support this
holistic approach:
The Family Self Sufficiency (FSS) program provided $75
million to over 700 grantees last year, and in FY2016 provided
services to over 70,000 households. In FSS, the head of
household signs a contract of participation that maps out steps
he/she will take to achieve self-sufficiency over the next 5
years. The FSS coordinator works with that family member to
develop that contract, and connects him/her to services and
jobs that will help him/her become economically self-
sufficient.
The Jobs Plus program, modeled after a successful evidence-
based pilot in the 1990s, has awarded $63 million in grants to
24 Public Housing Authorities over the past 3 years. Jobs Plus
uses three strategies--intense job training and case
management, rent incentives, and community support for work--at
targeted public housing developments over 4 years. Grantees
work with all able-bodied residents in that development and
measure employment training, job placement, and retention.
The Jobs Plus and FSS programs are just two examples of
successful self-sufficiency initiatives for our assisted
families. If confirmed, I will also join the effort to examine
the Section 3 work requirements--revisiting the regulation and
its implementation to ensure better outcomes for families and
less red tape for PHAs. If confirmed, I will also work with
Secretary Carson on his Envision Center initiative, to better
develop the potential of HUD assisted families through public-
private partnerships that would provide increased access to
wrap-around services.
Two ways to measure progress and success are measuring
increases in income and increases in the number of positive
exits (e.g., buying a home; renting a tax credit unit, etc.)
from the public housing and HCV programs.
Q.3. In no State in the Nation can a full-time minimum-wage
worker afford to rent a two-bedroom home at HUD's Fair Market
Rent, and a one-bedroom home is affordable to such a worker in
only 12 counties. According to the National Low Income Housing
Coalition, six of the seven occupations expected to add the
most jobs by 2024 have median wages that are less than the
``housing wage'' necessary to afford a one bedroom apartment.
Do you support an increase in the minimum wage in order to
enable more workers to afford rent?
A.3. The minimum wage is established by Congress in conjunction
with the Department of Labor through the Fair Labor Standards
Act. If confirmed, in my role as Assistant Secretary for Public
and Indian Housing, I will work with tenant advocate groups
such as the National Low-Income Housing Coalition to address
the needs of the people HUD serves. While the minimum wage is
set by the Department of Labor, my experience as a housing
practitioner informs me that HUD can have an impact in this
area by providing communities with the necessary tools to help
them develop more affordable housing.
Q.4. In your testimony before the Committee, you said that we
should ``not just provide housing, but the wraparound services
that we need to provide to ensure that we can graduate people
out of public housing.''
What additional services would you provide for public and
Indian housing residents, and, given the funding cuts in
President Trump's budget proposal, where will you find the
Federal resources for these services without compromising HUD's
mission to house families?
A.4. If confirmed, I will continue to support PIH's work with
other Federal agencies through partnerships targeting housing,
health, education, and workforce development. I would work to
strengthen the already-existing relationships between HUD and
other Federal agencies, but also work on creating new
partnerships to better coordinate our work in providing
resources and programs for low-income communities. I will also
work with Secretary Carson on his Envision Center initiative,
to better develop the potential of HUD assisted families
through public-private partnerships that would provide
increased access to wrap-around services.
Q.5. Mr. Montgomery and Mr. Kurtz, the rental assistance
programs you administer affect many families, seniors, and
individuals with disabilities.
If confirmed, will you commit to meeting with assisted
families and organizations that advocate on behalf of HUD
program participants and low-income families?
Do you support dialogue between HUD staff and organized
tenant groups to assist HUD in its oversight of housing
programs?
A.5. If confirmed, I will make it a priority to get out into
the communities PIH serves, and meet with resident groups and
advocacy organizations. I plan to personally engage in dialogue
and strengthen relationships with tenant groups and advocacy
organizations.
------
RESPONSES TO WRITTEN QUESTIONS OF SENATOR SCOTT
FROM ROBERT HUNTER KURTZ
Q.1. The Family Self-Sufficiency Program has enabled families
in public housing to enroll in workforce training that allows
them to pursue higher-paying employment opportunities.
We are both housing folks and empowering them to reach for
new economic opportunities.
That's a win-win.
Senators Reed and I have introduced the Family Self-
Sufficiency Act to save HUD resources by consolidating
redundant programs and broaden the supportive services under
FSS to include financial literacy training and GED courses.
It's another win-win.
Please answer the following with specificity:
How can HUD better ``treat the whole person'' as Secretary
Carson says?
A.1. If confirmed, I will strongly advocate for a holistic
approach to assisted housing families that extends beyond
bricks and mortar and focuses on providing opportunities for
families to achieve self-sufficiency. In support of this
effort, HUD has two programs in particular that are
administered by Public and Indian Housing that support this
holistic approach:
The Family Self Sufficiency (FSS) program provided $75
million to over 700 grantees last year, and in FY2016 provided
services to over 70,000 households. In FSS, the head of
household signs a contract of participation that maps out steps
he/she will take to achieve self-sufficiency over the next 5
years. The FSS coordinator works with that family member to
develop that contract, and connects those families to services
and jobs that will help them become economically self-
sufficient.
The Jobs Plus program, modeled after a successful evidence-
based pilot in the 1990s, has awarded $63 million in grants to
24 Public Housing Authorities over the past 3 years. Jobs Plus
uses three strategies--intense job training and case
management, rent incentives, and community support for work--at
targeted public housing developments over 4 years. Grantees
work with all able-bodied residents in that development.
Q.2. What are your ideas to do so?
A.2. The Jobs Plus and FSS programs are just two examples of
successful self-sufficiency initiatives for our assisted
families. If confirmed, I will also join the effort to examine
the Section 3 work requirements, revisiting the regulation and
its implementation to ensure better outcomes for families and
less red tape for PHAs. If confirmed, I will also work with
Secretary Carson on his Envision Center initiative to better
develop the potential of HUD assisted families through public-
private partnerships that would provide increased access to
wrap-around services.
------
RESPONSES TO WRITTEN QUESTIONS OF
SENATOR MENENDEZ FROM ROBERT HUNTER KURTZ
Q.1. During your nomination hearing, when asked about your
opinion on the budget, you said that you had experience working
in areas with limited resources, such as Detroit. Many of the
future funding issues we face at HUD, however, are products of
the Administration's creation, which has proposed to slash
funding for public housing, tenant and property-based rental
assistance, and various other programs. As the Assistant
Secretary for Public and Indian Housing, your opinion on
funding levels matters. Will you commit to advocating for
increased funding for public housing and tenant-based rental
assistance, among other programs?
A.1. I will always be an advocate for the families served by
the office of Public and Indian Housing. In my time as a
practitioner in Detroit, I saw firsthand how these resources
are used and how public-private partnerships, and reducing
regulatory burdens can serve the families that rely on HUD
programs. I do believe the budget proposal is the beginning of
an iterative process and, if confirmed, I will bring a housing
practitioner's perspective to deliberations on future budgets
and pledge to use funds appropriated by Congress to the best of
my abilities.
Q.2. Are you willing to advocate for additional Federal
resources to repair and renovate public housing developments?
A.2. I recognize that the budget process is an iterative one,
and, if confirmed, I look forward to bringing my perspective as
a housing practitioner to future budget deliberations and
pledge to use funds appropriated by Congress to the best of my
abilities. The investment necessary to address the public
housing capital fund backlog is overwhelming, at over $26
billion, and has grown steadily over the years regardless of
funding levels. As a result, one vehicle that should be
considered for expansion to address this backlog is the Rental
Assistance Demonstration (RAD). To date, PHAs have generated
over $4.5 billion in capital investment to improve or redevelop
over 75,000 public housing units. Even at the highest
appropriation levels seen in recent years, it would have taken
these public housing authorities over 40 years to implement
this amount of construction.
Q.3. The President's fiscal year 2018 budget request proposes
elimination of the Choice Neighborhoods program.
Do you support elimination of the Choice Neighborhoods
program?
A.3. HUD did not seek funds for the Choice Neighborhoods
program in the President's FY2018 Budget; however, HUD expects
to make both Choice Planning and Implementation grants from the
FY2017 Appropriations by February and July 2018, respectively.
I do believe the budget proposal is the beginning of an
iterative process and, if confirmed, I will bring a housing
practitioner's perspective to deliberations on future budgets
and pledge to use funds appropriated by Congress to the best of
my abilities.
Q.4. If you do support the budget, please explain what
alternative funding mechanisms will be provided to revitalize
public and assisted housing and their surrounding communities?
A.4. Regarding the capital fund which is used to revitalize
public and assisted housing, I believe the budget recognizes
that public housing is a partnership between Federal, State,
and local governments. If confirmed, I am committed to using my
experience at HUD and in Detroit to help our local partners
leverage outside public and private investment in addition to
Federal funds to meet the capital repair and modernization
needs of public housing properties, with an eye towards long-
term sustainability. I would also like to work with our housing
authority partners to learn what flexibilities might allow them
to better utilize funding to address local needs, while still
protecting the residents we serve. One vehicle that should be
considered for expansion to address this backlog is the Rental
Assistance Demonstration (RAD) program. To date, PHAs have
generated over $4.5 billion in capital investment to improve or
redevelop over 75,000 public housing units. Even at the highest
appropriation levels seen in recent years, it would have taken
these public housing authorities over 40 years to implement
this amount of construction.
Q.5. Do you support a 67 percent reduction to the Public
Housing Capital Fund as proposed in the budget? If you do
support the budget, please provide a detailed explanation of
what funding sources public housing agencies can utilize to
address the backlog of capital repairs estimated in 2010 to be
at $26 billion and increasing each year.
A.5. I was not part of the decision-making process as it
relates to developing the President's Fiscal Year 2018 Budget.
I recognize that the budget process is an iterative one, and,
if confirmed, I look forward to bringing my perspective as a
housing practitioner to future budget deliberations and pledge
to use funds appropriated by Congress to the best of my
abilities. The investment necessary to address the capital fund
backlog is overwhelming, at over $26 billion, and has grown
steadily over the years regardless of funding levels. The
capital needs of public housing can only be met by leveraging
public and private funding--such as debt, low-income housing
tax credit equity, bonds, city and State funding--with the
available Federal funds. As a result, one vehicle that should
be considered for expansion to address this backlog is the
Rental Assistance Demonstration (RAD) program. To date, PHAs
have generated over $4.5 billion in capital investment to
improve or redevelop over 75,000 public housing units. Even at
the highest appropriation levels seen in recent years, it would
have taken these public housing authorities over 40 years to
implement this amount of construction. Also, if confirmed, I am
committed to providing PHAs with as many ``tools in the
toolbox'' as possible to empower them to make the best
decisions in their communities. Some examples of these tools
are the Operating Fund Financing Program, Capital Fund
Financing Program, Voluntary Conversions, Section 30
(mortgaging) program, Operating and Capital Fund Flexibility,
and Section 18 Demolition/Disposition authorities.
Q.6. Do you support a 12 percent reduction to the Public
Housing Operating Fund as proposed in the budget? If you do
support the budget, please describe how this proposed cut will
impact public housing agencies' ability to operate and maintain
the country's 1.1 million public housing units. Please also
describe how the proposed cut will impact the residents living
in public housing units.
A.6. I was not part of the decision-making process as it
relates to developing the President's Fiscal Year 2018 Budget.
I recognize that the budget process is an iterative one, and,
if confirmed, I look forward to bringing my perspective as a
housing practitioner to future budget deliberations and pledge
to use funds appropriated by Congress to the best of my
abilities. The FY2018 budget does include two important
proposals that would provide PHAs with much needed
flexibilities to better serve their families within the public
housing budgetary constraints. Under the first legislative
proposal, HUD seeks broad authority to waive statutory and
regulatory requirements to provide PHAs with the flexibility to
tailor and apply policies that address their individual needs
and are acceptable within their local communities. The second
legislative proposal extends 100 percent Operating and Capital
fund flexibility to all PHAs (currently this only applies to
small PHAs that have under 250 units). This flexibility would
enable PHAs to focus scarce resources on local priorities
without being constrained by the statutory limitations of each
fund.
Q.7. Do you support a nearly 5 percent reduction to the Tenant
Based Rental Assistance account as proposed in the budget? This
proposed cut will result in elimination of approximately
250,000 housing vouchers, nearly 8,000 of which are in New
Jersey. If you do support the budget, how would you propose
addressing the resulting increased housing instability and risk
of homelessness?
A.7. I recognize the importance of this program and, if
confirmed, I will continue to advocate for the families served
by the Tenant Based Rental Assistance program. I was not part
of the decision-making process as it relates to developing the
President's Fiscal Year 2018 Budget. I recognize that the
budget process is an iterative one, and, if confirmed, I look
forward to bringing my perspective as a housing practitioner to
future budget deliberations and pledge to use funds
appropriated by Congress to the best of my abilities. The
President's FY2018 Budget for the Housing Choice Voucher
program renewal funding provides cost savings, waiver and
offset authority, and administrative flexibilities for public
housing agencies to prevent the termination of families due to
insufficient funding. Within the Office of Public and Indian
Housing, there is a specialized Shortfall Prevention Team that
works with PHAs that may experience financial difficulties and
assists them in ensuring that they are taking appropriate cost
savings measures and applying for shortfall prevention funds,
if necessary. If confirmed, I will make sure that this team
continues to operate effectively, working with our partner PHAs
to prevent terminations and ensure proper management of program
funds.
------
RESPONSES TO WRITTEN QUESTIONS OF SENATOR HEITKAMP
FROM ROBERT HUNTER KURTZ
Q.1. I appreciated getting the chance to meet with you and
discuss housing in Indian Country. As you know, there is a
dearth of financing and collaboration of Government programs on
tribal lands. In 2015, about a third of all lenders (about
2,000 institutions) originated a loan to a Native American or
Alaska Natives, but only about 165 made a loan on trust lands.
Lender involvement has also declined in HUD's Section 184
guaranteed home loan program.
How to you plan to address this lack of equity access in
Indian Country?
A.1. If confirmed, I will be committed to improving access to
private mortgage capital in Indian Country.
In January 2017, as part of the congressionally mandated
Assessment of American Indian, Alaska Native, and Native
Hawaiian Housing Needs, HUD published, Mortgage Lending on
Tribal Land: A Report From the Assessment of American Indian,
Alaska Native, and Native Hawaiian Housing Needs. The report
finds that HUD's Indian Housing Loan Guarantee program, also
known as the Section 184 program, successfully eliminates the
functional market barrier to private lending presented by
tribal trust land. The report also details several
recommendations I am committed to pursuing to further increase
lending to Native American families through efforts like
enhanced agency coordination and regulatory improvements.
Q.2. Additionally, more than 90 percent of Section 184 loans
occur off trust land.
How can HUD build the capacity of smaller community banks
and streamline the process to increase the rate of lending on
trust land?
A.2. If confirmed, I pledge to work with the Bureau of Indian
Affairs to streamline and improve the processing of certified
Title Status Reports (TSRs) that are necessary to tribal trust
land lending. In addition, I will support the continued
investment in automation of HUD's Indian Housing Loan Guarantee
program, also known as the Section 184 program, processes that
will increase lender participation, and improve the efficiency
of program Administration.
Q.3. HUD should take initiative to work with tribal authorities
and other agencies to bring in other resources to complement
and supplement NAHASDA funds. For example, the Department of
Agriculture's Rural Development Agency has excellent home
ownership and repair programs that would be very beneficial on
trust lands. Federal agencies need to work together to maximize
support for Native Americans.
How do you plan on working with USDA Rural Development in
partnership to serve Indian Country?
A.3. If confirmed, I pledge to meet with the Assistant to the
Secretary for Rural Development within my first 30 days in
office. Additionally, I will partner with tribes and tribally
designated housing entities (TDHEs) to find and maximize all
the resources that are available to Indian Country to support
affordable housing development in a coordinated manner.
Q.4. In my conversation with him during his confirmation
process, Secretary Carson focused on the importance of a
holistic approach to housing. In that vein, I believe HUD needs
to take trauma into consideration when looking for housing
solutions, especially for Native American populations.
I sent a letter to Secretary Carson earlier this month
asking him to fill me in on what HUD has been working on with
respect to trauma, but would like to hear your thoughts on the
intersection of trauma and housing, and the need for trauma-
informed housing solutions.
A.4. As a former practitioner of many HUD programs in the City
of Detroit, I have found that providing flexibility for HUD's
local partners to address the needs of local populations,
including those that have experienced trauma at any stage of
life, is vital. If confirmed, I look forward to working with
HUD's local partners and your office to ensure the needs of
vulnerable populations are being met throughout all of PIH's
programs.
------
RESPONSES TO WRITTEN QUESTIONS OF
SENATOR DONNELLY FROM ROBERT HUNTER KURTZ
Q.1. Mr. Kurtz, as nominee for Public Housing, you will oversee
public housing authorities. As we learned in East Chicago,
Indiana, where the lives of more than 300 families were upended
and put at risk due to the presence of significant levels of
lead and arsenic in the soil, contaminated housing units are
dangerous to the health of residents.
Mr. Kurtz, East Chicago was not an isolated incident. How
do you plan to prepare and prevent similar crises from
happening elsewhere? What steps can or should HUD take?
A.1. As a housing practitioner in Detroit, I have been subject
to monitoring and have monitored grantees during my time at the
Department. I believe that is where the rubber meets the road.
If confirmed, I will look for ways that PIH can improve its
monitoring process as well as partner with other agencies,
including the EPA.
Q.2. Communities throughout Indiana have benefited from blight
elimination funding, but the need remains significant.
Abandoned and neglected buildings can often result in increased
crime and distressed communities, demonstrating the need for
blight elimination. I was troubled to see the proposed cuts to
the CDBG program in the HUD budget.
Mr. Kurtz, you have experience within this area at HUD. In
addition to the importance of community planning and
development, how can we help cities and towns combat housing
blight if the CDBG program is eliminated? Do you oppose the
elimination of the CDBG program?
A.2. Combating housing blight is a critical issue and one that
I had firsthand experience with during my time in Detroit. In
Detroit, we found success by reprioritizing State and local
funding, while incentivizing the sale of blighted properties. I
was not part of the decision-making process as it related to
developing the Fiscal Year 2018 President's Budget. In Detroit,
I have seen CDBG resources deployed in an effective and
efficient manner, however, and from my time in Washington, I am
also aware of these funds being used for things far outside of
HUD's core mission. I do believe the budget proposal is the
beginning of an iterative process and, if confirmed, I will
bring a housing practitioner's perspective to deliberations on
future budgets and pledge to use funds appropriated by Congress
to the best of my abilities.
------
RESPONSES TO WRITTEN QUESTIONS OF
SENATOR CORTEZ MASTO FROM ROBERT HUNTER KURTZ
Q.1. The Trump administration's budget proposal for fiscal year
2018 proposed cutting the public housing capital fund by two-
thirds. If that budget was enacted, the capital budget would be
just one third of the lowest level of funding ever enacted.
If enacted, tenants with leaky roofs would be ignored.
Broken heating systems would go unrepaired. Faulty electrical
wiring wouldn't be replaced.
As one example, the Reno Housing Authority recently shared
with my office that one property under their management needs
nearly $450,000 in essential sewer repairs. Their total capital
fund budget is $915,000, to be dispersed among eight
properties. And two other senior housing developments also need
sewer system upgrades.
Secretary Carson has said that under his watch ``no one
will be thrown out on the street.'' \1\ But if the Reno Housing
Authority doesn't have the money to fix these sewer lines, the
units will become uninhabitable. No amount of ``cutting red
tape'' can address substantial, prolonged funding cuts.
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\1\ https://www.washingtonpost.com/news/post-politics/wp/2017/04/
03/carson-assures-advocates-that-white-house-will-include-housing-
funding-in-infrastructure-bill/?utm_term=.281c64576bdc
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How can the Administration justify a 68 percent cut to the
fund dedicated to repairing public housing? Were you part of
that decision in your role in Secretary's front office?
A.1. I was not part of the decision-making process as it
relates to developing the President's Fiscal Year 2018 Budget.
I do believe the budget proposal is the beginning of an
iterative process and, if confirmed, I will bring a housing
practitioner's perspective to deliberations on future budgets
and pledge to use funds appropriated by Congress to the best of
my abilities.
Regarding the capital fund, I believe the budget recognizes
that public housing is a partnership between Federal, State,
and local governments. If confirmed, I am also committed to
using my experience at HUD and in Detroit to help our local
partners leverage outside public and private investment in
addition to Federal funds to meet the capital repair and
modernization needs of public housing properties, with an eye
towards long-term sustainability. Finally, I would like to work
with our housing authority partners to learn what flexibilities
might allow them to better utilize funding to address local
needs, while still protecting the residents we serve.
Q.2. If confirmed, will you advocate for additional public
housing capital funding?
A.2. If confirmed, my top priority will be to advocate for the
families participating in the Office of Public and Indian
Housing (PIH) programs. I recognize that the budget process is
an iterative one, and, if confirmed, I look forward to bringing
my perspective as a housing practitioner to future budget
deliberations and pledge to use funds appropriated by Congress
to the best of my abilities. The investment necessary to
address the capital fund backlog is overwhelming, at over $26
billion, and has grown steadily over the years regardless of
funding levels. As a result, one vehicle that should be
considered for expansion to address this backlog is the Rental
Assistance Demonstration (RAD). To date, PHAs have generated
over $4.5 billion in capital investment to improve or redevelop
over 75,000 public housing units. Even at the highest
appropriation levels seen in recent years, it would have taken
these public housing authorities over 40 years to implement
this amount of construction.
Q.3. There's a $26 billion dollar backlog in needed public
housing capital repairs. Secretary Carson has suggested
addressing this by expanding the Rental Assistance
Demonstration (RAD), which allows public housing authorities to
borrow money from the private sector, and use their
appropriations to service the debt now incurred on the public
property.
The problem with this approach is that this borrowing can't
work if the appropriations aren't there in the first place. And
beyond that, I'm not sure why we would want public housing to
take on debt to fund repairs, rather than just pay for the
repairs directly.
How do you expect the RAD program to address the public
housing capital repair backlog when the Administration is
requesting deep cuts to appropriations?
A.3. Direct Federal appropriations to the public housing
accounts have been unable to address the capital backlog in the
public housing inventory. The Rental Assistance Demonstration
(RAD) is a critical preservation program that has allowed PHAs
to secure low-income housing tax credit investments, debt and
other non-Federal funding to make needed capital repairs to
these properties while protecting resident rights and ensuring
ongoing public stewardship of the properties. To date, PHAs
have generated over $4.5 billion in capital investment to
improve or redevelop over 75,000 public housing units. Even at
the highest appropriation levels seen in recent years, it would
have taken these public housing authorities over 40 years to
implement this amount of construction. This investment improves
the condition of the housing now and makes a significant
positive difference in residents' quality of life.
Q.4. How could a public housing authority service the repair-
related debt with the funding levels the Administration's
budget suggests?
A.4. When a property converts under RAD, it shifts its source
of subsidy funding from the public housing account to the
Section 8 account. It is no longer reliant on public housing
funding. Private financing sources are quite comfortable
underwriting properties on the Section 8 platform.
Q.5. On July 5th, I sent a letter along with 28 of my Senate
colleagues regarding HUD's decision to pull down from their
website information that housing providers would be required to
post about access to shelters without regard to sexual
orientation or gender identity.
During the Obama administration, HUD developed this
information in consultation with homeless service providers and
subject matter experts. The materials were designed to help
housing operators comply with HUD nondiscrimination rules that
protect LGBTQ individuals.
I asked the nominee for Community Planning & Development at
HUD, Neal Rackleff, for a response to my letter at his
nomination hearing back in July, and he pledged to get me a
response within two weeks. I have been patient in pushing HUD
for a response, because I know Mr. Rackleff has been
preoccupied with disaster recovery. But it's been three months
now. While I know you won't be responsible for the homelessness
portfolio if confirmed, you have been in Secretary Carson's
front office. Will you pledge to immediately get me a response
to this letter?
A.5. While I have not been involved in this issue to date, if
confirmed, I pledge to immediately discuss the progress of this
response with Assistant Secretary Rackleff and will urge the
Department's relevant officials to complete this response in an
expeditious manner. I also pledge, if confirmed, to work to
protect all people being served by HUD's Office of Public and
Indian Housing.
Q.6. The concept of ``Brooke Rents'' undergird our Nation's
housing programs, providing that tenants should not pay more
than 30 percent of their income for rent and utilities. Brooke
Rent levels are based on research suggesting that rent
exceeding this level simply isn't affordable for most low-
income people, seniors and people with disabilities. The
President's proposed 2018 budget provides the HUD Secretary
with the authority to increase a tenant's rent contribution up
to 35 percent.
Do you agree with housing experts and advocates that Brooke
Rents ought to be protected in all HUD programs?
A.6. Please know that I will always be a staunch advocate for
the families served by the Office of Public and Indian Housing.
I learned through my experience in Detroit that giving
flexibilities and control to local practitioners can deliver
better results than mandates from D.C. If confirmed, I am
committed to reviewing the rent calculation process to
determine if some of its administrative burdens can be
relieved, while maintaining adequate protections for our most
vulnerable families.
Q.7. While the Administration claims that hardship exemptions
would be available to households, what little we do know about
the implementation of hardship policies on the ground indicates
that they are likely only to protect a few families. And HUD
doesn't collect or track data on how hardship exemptions are
being enforced. So do you think current exemption policies to
help vulnerable households are sufficient? What data do you
have to support this opinion?
A.7. If confirmed, one of my first actions will be to go
through the same intake process as a public housing or Housing
Choice Voucher family. Through that process, I will be able to
get a better sense of whether the current hardship exemption
process is adequate. I will also review any available data on
the use of hardship exemptions to determine if any changes are
necessary, and, if not enough data is available, I will work to
improve collection and tracking. Currently, there is some data
available from Moving to Work Agencies which can be used to
analyze the effectiveness of the current hardship policies.
------
RESPONSES TO WRITTEN QUESTIONS OF SENATOR BROWN
FROM SUZANNE ISRAEL TUFTS
Q.1. Can you share with us some of your top priorities if you
are confirmed as the Assistant Secretary for Administration?
A.1. If confirmed, my overall approach will be to re-imagine
the way HUD works so that HUD's Administrative and Personnel
divisions deliver timely and effective services to the
Department's employees, its partners and, ultimately, to its
customers.
I plan to be a reformative thinker, to implement change,
and to create a culture of excellence and accountability.
Specifically, my three top priority goals are:
1. Improve HUD's talent and human resource processes so that
the Department can recruit and develop a high-
performing, engaged, diverse workforce.
2. Improve administrative services so that they operate more
efficiently and intersect more effectively with human
resources and with the Department's program units both
at HQ and in the field.
3. Improve the Department's physical footprint both at
Headquarters and in the field, to achieve maximum space
efficiency and cost savings.
Q.2. HUD's FY2017 Congressional Justifications stated that HUD
possesses the highest percentage of any agency of career
employees eligible to retire by 2019. HUD stated that ``The
retirement wave can cause a loss of leadership and
institutional knowledge at all levels.''
If confirmed, what would you do to ensure that HUD has the
workforce it needs to deliver on its mission in the coming
years, particularly in light of a possible wave of retirements?
A.2. Making HUD an attractive place to work with a highly
skilled, diverse, and engaged workforce is one of my top
priorities. If confirmed, I plan to approach workforce planning
by starting with the approach set forth by Secretary Carson in
his testimony before the Committee: ``listen and respect the
career professionals. Engage them and utilize their advice and
suggestions.'' I believe we have a lot to learn from the career
staff in addition to having a lot to bring to them.
Specifically, my priority would be to help prepare HUD for
short term, large numbers of retirements by instituting
creative knowledge transfer strategies such as cross training,
employee mentoring, and process documentation. Second, in
keeping with workplace best practices, I would institute a
rapid approach to workforce planning utilizing the best data
and career employee insights and input. Third, I would bring my
experience in the field to enhance our recruitment creativity
so that HUD can rapidly and efficiently reach out to the widest
range of talent including Millennials; Gen-Xers; diverse
candidates; and those from under-represented groups such as
returning veterans, disabled individuals, Baby Boomers who want
to on-ramp or who are mid-life career changers, pools of talent
within the Federal arena such as Presidential Management
Fellows, Peace Corps, and AmeriCorps ``graduates''; and other
talented individuals.
Finally, if confirmed and perhaps most important for the
long run, I will work actively along with all program units and
senior leadership to make HUD a dynamic workplace both in
Headquarters and in the Regions, so that it can retain the
talent it has and attract top talent.
Q.3. A recent HUD Inspector General's audit noted that HUD
faces a significant potential litigation liability of between
$55 million and $650 million for an arbitration known as the
``Fair and Equitable Arbitration Remedy''. This case has been
going on over 10 years.
If confirmed, will you commit to looking into this case and
working towards expeditious resolution to the case, if
appropriate?
A.3. If confirmed, I commit to seeking guidance from the HUD
Office of General Counsel and all other relevant HUD units to
seek an expeditious resolution to this matter.
Additional Material Supplied for the Record
LETTERS SUBMITTED IN SUPPORT OF THE NOMINATION OF BRIAN D. MONTGOMERY
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
LETTERS SUBMITTED IN SUPPORT OF THE NOMINATION OF ROBERT HUNTER KURTZ
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]